1. The following payments and receipts are related to land, land improvements, a

Question

1. The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk. a. Fee paid to attorney for title search $ 2,500 b. Cost of real estate acquired as a plant site: Land 285,000 Building (to be demolished) 55,000 c. Delinquent real estate taxes on property, assumed by purchaser 15,500 d. Cost of tearing down and removing building acquired in (b) 5,000 e.* Proceeds from sale of salvage materials from old building 4,000 f. Special assessment paid to city for extension of water main to the property 29,000 g. Architect’s and engineer’s fees for plans and supervision 60,000 h. Premium on one-year insurance policy during construction 6,000 i. Cost of filling and grading land 12,000 j.* Money borrowed to pay building contractor 900,000 k. Cost of repairing windstorm damage during construction 5,500 l. Cost of paving parking lot to be used by customers 32,000 m. Cost of trees and shrubbery planted 11,000 n. Cost of floodlights installed on parking lot 2,000 o. Cost of repairing vandalism damage during construction 2,500 p.* Proceeds from insurance company for windstorm and vandalism damage 7,500 q. Payment to building contractor for new building 800,000 r. Interest incurred on building loan during construction 34,500 s.* Refund of premium on insurance policy (h) canceled after 11 months 500

Explanation / Answer

Sl.No. Item Total Land Building Land improvements 1 Purchase price 340000 285000 55000 2 Fee paid to attorney for title search 2500 2096 404 (To be apportioned onthe cost of each item) 3 Real estate taxes 15500 12993 2507 (To be apportioned onthe cost of each item) 4 Sale of salvage material from old building -4000 -4000 5 Special assessment paid for water line 29000 24309 4691 (To be apportioned onthe cost of each item) 6 Architects and engineer's fee 60000 60000 7 Dinsurance policy premium for construction 6000 6000 8 Cost of filling and grading 12000 12000 9 Cost of repairing windstorm damage 5500 5500 10 Cost of paving parking lot 32000 0 32000 11 Cost of trees and shrubbery planted 11000 11000 12 Cost of flood lights for parking lot 2000 2000 13 Cost of repairing windstorm damage 2500 2500 14 Proceeds from insurance company for windstorm damage -7500 -7500 15 Payment to building contractor 800000 800000 16 Interest incured on building loan during construction 34500 34500 17 Refund of premium on insurance policy -500 -500 Total cost to be accounted 1340500 324397 959103 57000

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