Venable Company was organized on January 1. During the first year of operations,
ID: 2583428 • Letter: V
Question
Venable Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order.
Debit
1.
Cost of filling and grading the land
$ 4,500
2.
Full payment to building contractor
680,500
3.
Real estate taxes on land paid for the current year
4,500
4.
Cost of real estate purchased as a plant site (land $115,000 and building $46,500)
161,500
5.
Excavation costs for new building
35,500
6.
Architect’s fees on building plans
12,500
7.
Accrued real estate taxes paid at time of purchase of real estate
2,000
8.
Cost of parking lots and driveways
13,500
9.
Cost of demolishing building to make land suitable for construction of new building
26,000
$940,500
Credit
10.
Proceeds from salvage of demolished building
$ 3,500
Analyze the foregoing transactions using the following column headings. Insert the amounts in the appropriate columns. (If an amount reduces the account balance then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).)
Item
Land
Buildings
Other Accounts
1.
$
$
$
2.
3.
4.
5.
6.
7.
8.
9.
10.
$
$
Debit
1.
Cost of filling and grading the land
$ 4,500
2.
Full payment to building contractor
680,500
3.
Real estate taxes on land paid for the current year
4,500
4.
Cost of real estate purchased as a plant site (land $115,000 and building $46,500)
161,500
5.
Excavation costs for new building
35,500
6.
Architect’s fees on building plans
12,500
7.
Accrued real estate taxes paid at time of purchase of real estate
2,000
8.
Cost of parking lots and driveways
13,500
9.
Cost of demolishing building to make land suitable for construction of new building
26,000
$940,500
Credit
10.
Proceeds from salvage of demolished building
$ 3,500
Explanation / Answer
Long Term Assets are those assets which have a useful life of more than 1 year and not meant for resale. Long Term Assets includes tangible assets, intangible assets and natural resources.
Land When a land is purchased then the price paid to buy the property should be debited to land account. Other expenditures such as commission to agents, paving cost, clearing cost are also debited to land. Land is having unlimited life so it is not depreciated.
Building Amount paid to buy the building and all expenditure required to put the building in usable condition are charged to building account. In case of construction net contract price plus all expenditure required to put building in usable condition is debited to building account.
Cost of land, building and other accounts is as shown below:
Item Land Buildings Other Accounts 1 Cost of filling and grading the land 4,500 4,500 2 Full payment to building contractor 680,500 680,500 3 Real estate taxes on land paid for the current year 4,500 4,500 4 Cost of real estate purchased as a plant site (land $115,000 and building $46,500) 161,500 161,500 5 Excavation costs for new building 35,500 35,500 6 Architect’s fees on building plans 12,500 12,500 7 Accrued real estate taxes paid at time of purchase of real estate 2,000 2,000 8 Cost of parking lots and driveways 13,500 13,500 9 Cost of demolishing building to make land suitable for construction of new building 26,000 26,000 10 Proceeds from salvage of demolished building -3,500 -3,500 937000 31,500 890,000 15,500Related Questions
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