During year 4, Fur began a project to construct new corporate headquarters. Fur
ID: 2459835 • Letter: D
Question
During year 4, Fur began a project to construct new corporate headquarters. Fur purchased land with an existing building on it for $840,000. The land was valued at $800,000 and the building at $40,000. Fur planned to demolish the building and construct a new office building on the site.
For each expenditure in item 1 through 9, select from the list below the appropriate accounting treatment.
Treatment Choices
L. Classify as land and do not depreciate.
B. Classify as building and depreciate.
E. Expense
Expenditure
Treatment
1. Moving costs of $142,000.
E -Is it correct answer ?
2. $55,000 cost of razing the existing building.
L
3. $13,200 liability insurance premium during the construction period.
B
4. $19,000 payment of delinquent real estate taxes assumed by fur on purchase.
L
5. Purchase of building for $40,000.
B
6. Purchase of land for $800,000.
L
7. Costs of $25,000 for current year security contract on the property.
8. Legal fees in connection with the purchase of the building $7,500.
9. Special assessment by the city for expanding sidewalks in front of the building, $10,000.
Treatment Choices
L. Classify as land and do not depreciate.
B. Classify as building and depreciate.
E. Expense
Explanation / Answer
Expenditure
Treatment
1. Moving costs of $142,000.
E - correct answer
2. $55,000 cost of razing the existing building.
L
3. $13,200 liability insurance premium during the construction period.
B
4. $19,000 payment of delinquent real estate taxes assumed by fur on purchase.
L
5. Purchase of building for $40,000.
B
6. Purchase of land for $800,000.
L
7. Costs of $25,000 for current year security contract on the roperty. L
8. Legal fees in connection with the purchase of the building $7,500. B
9. Special assessment by the city for expanding sidewalks in front of the building, $10,000. E
Expenditure
Treatment
1. Moving costs of $142,000.
E - correct answer
2. $55,000 cost of razing the existing building.
L
3. $13,200 liability insurance premium during the construction period.
B
4. $19,000 payment of delinquent real estate taxes assumed by fur on purchase.
L
5. Purchase of building for $40,000.
B
6. Purchase of land for $800,000.
L
7. Costs of $25,000 for current year security contract on the roperty. L
8. Legal fees in connection with the purchase of the building $7,500. B
9. Special assessment by the city for expanding sidewalks in front of the building, $10,000. E
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