Chapter 10, Problem P10.36BPGB

Determining asset cost and recording partial-year depreciation

Learning Objectives 1, 2

1. Bldg. $483,500

Safe Parking, near an airport, incurred the following costs to acquire land, make land improvements, and construct and furnish a small building:

Purchase price of three acres of land	$ 86,000
Delinquent real estate taxes on the land to be paid by Discount Parking	6,300
Additional dirt and earthmoving	8,400
Title insurance of the land acquisition	3,400
Fence around the boundary of the property	9,600
Building permit for the building	900
Architect’s fee for the design of the building	20,100
Signs near the front of the property	9,000
Materials used to construct the property	217,000
Labor to construct the property	172,000
Interest cost on construction loan for the building	9,500
Parking lots on the property	29,400
Lights for the parking lots	11,600
Salary of construction supervisor (80% to building; 20% to parking lot and concrete walls)	80,000
Furniture	11,700
Transportation of furniture from seller to the building	1,900
Additional fencing	6,900

Safe Parking depreciates land improvements over 15 years, building over 40 years, and furniture over 10 years, all on a straight-line basis with zero residual value.

Requirements

1. Set up columns for Land, Land Improvements, Building, and Furniture. Show how to account for each cost by listing the cost under the correct account. Determine the total cost of each asset.
2. All construction was complete and the assets were placed in service on September 1. Record partial-year depreciation expense for the year ended December 31. Round to the nearest dollar.