Assume Coffee HouseCoffee House?, ?Inc., opened an office in Grove CityGrove Cit
ID: 2528450 • Letter: A
Question
Assume
Coffee HouseCoffee House?,
?Inc., opened an office in
Grove CityGrove City?,
Ohio.
Coffee HouseCoffee House
incurred the following costs in acquiring? land, making land? improvements, and constructing and furnishing the new sales? building:
Assume
Coffee HouseCoffee House
depreciates buildings over
3030
?years, land improvements over
2525
?years, and furniture over
1212
?years, all on a? straight-line basis with zero residual value.Read the requirements
Requirement 2. All construction was complete and the assets were placed in service on
AprilApril
2. Record depreciation for the year ended December 31. Round to the nearest dollar.
.
Requirement 1. Show how to account for each of
Coffee House'sCoffee House's
costs by listing the cost under the correct account. Determine the total cost of each asset.
a.
Purchase price of land, including an old building that will be used
for a garage (land market value is $325,000; building market
value is $75,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$360,000
b.
Grading (leveling) land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,800
c.
Fence around the land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,900
d.
Attorney fee for title search on the land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
700
e.
Delinquent real estate taxes on the land to be paid by Coffee House . . . . . . .
5,200
f.
Company signs at entrance to the property . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,700
g.
Building permit for the sales building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
400
h.
Architect fee for the design of the sales building . . . . . . . . . . . . . . . . . . . . . . .
90,980
i.
Masonry, carpentry, and roofing of the sales building . . . . . . . . . . . . . . . . . . .
513,000
j.
Renovation of the garage building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,920
k.
Interest cost on construction loan for sales building . . . . . . . . . . . . . . . . . . . . .
9,500
l.
Landscaping (trees and shrubs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,900
m.
Parking lot and concrete walks on the property . . . . . . . . . . . . . . . . . . . . . . . .
52,500
n.
Lights for the parking lot and walkways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,800
o.
Salary of construction supervisor (84% to sales building; 10%
to land improvements; and 6% to garage building renovations) . . . . . . . . . . .
43,000
p.
Office furniture for the sales building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79,000
q.
Transportation and installation of furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,000
Assume
Coffee HouseCoffee House?,
?Inc., opened an office in
Grove CityGrove City?,
Ohio.
Coffee HouseCoffee House
incurred the following costs in acquiring? land, making land? improvements, and constructing and furnishing the new sales? building:
Assume
Coffee HouseCoffee House
depreciates buildings over
3030
?years, land improvements over
2525
?years, and furniture over
1212
?years, all on a? straight-line basis with zero residual value.Read the requirements
Requirement 2. All construction was complete and the assets were placed in service on
AprilApril
2. Record depreciation for the year ended December 31. Round to the nearest dollar.
.
Requirement 1. Show how to account for each of
Coffee House'sCoffee House's
costs by listing the cost under the correct account. Determine the total cost of each asset.
a.
Purchase price of land, including an old building that will be used
for a garage (land market value is $325,000; building market
value is $75,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$360,000
b.
Grading (leveling) land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,800
c.
Fence around the land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,900
d.
Attorney fee for title search on the land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
700
e.
Delinquent real estate taxes on the land to be paid by Coffee House . . . . . . .
5,200
f.
Company signs at entrance to the property . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,700
g.
Building permit for the sales building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
400
h.
Architect fee for the design of the sales building . . . . . . . . . . . . . . . . . . . . . . .
90,980
i.
Masonry, carpentry, and roofing of the sales building . . . . . . . . . . . . . . . . . . .
513,000
j.
Renovation of the garage building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,920
k.
Interest cost on construction loan for sales building . . . . . . . . . . . . . . . . . . . . .
9,500
l.
Landscaping (trees and shrubs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,900
m.
Parking lot and concrete walks on the property . . . . . . . . . . . . . . . . . . . . . . . .
52,500
n.
Lights for the parking lot and walkways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,800
o.
Salary of construction supervisor (84% to sales building; 10%
to land improvements; and 6% to garage building renovations) . . . . . . . . . . .
43,000
p.
Office furniture for the sales building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79,000
q.
Transportation and installation of furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,000
Explanation / Answer
Coffee house's cost land land improvements Garage building Sales Building Furniture 1 land value to be apportioned =325000/400000*360000 292500 Building Value tobe apportioned =75000/400000*360000 67500 2 Grading (leveling) Land 8800 3 Fence around the land 31900 4 Attorney fees for title search on the land 700 5 Delinquent real estate taxes paid 5200 6 Company signs at the entrance to the property 1700 7 Building permit for sales building 400 8 Architect fees for design of sales buidling 90980 9 Masonry, carpentry & roofing of sales building 513000 10 Renovation of garage building 45920 11 Interest cost for construction loan for building 9500 12 Landscaping(trees & shrubs) 6900 13 Parking Lots and concrete walks on property 52500 14 Lights of parking lots and walkways 7800 15 Salary of construction supervisior 4300 2580 36120 16 Office furniture for sales building 79000 17 Transportation and installation of furniture 1000 Total costs 307200 105100 116000 650000 80000 Number of years 0 25 30 30 12 Full year Depreciation as per straight-line method 4204 3866.666667 21666.66667 6666.666667 Date General journal Debit Credit Depreciation expense 36404 Accumulated depreciation on land improvements 4204 Accumulated depreciation on Garage Buidling 3866.67 Accumulated depreciation on Sales Buidling 21666.67 Accumulated depreciation on furniture 6666.67 To record the depreciation expense for the year
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