Allocating Payments and Receipts to Fixed Asset Accounts The following payments

Question

Allocating Payments and Receipts to Fixed Asset Accounts

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.

Required:

1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Choose the correct account from the dropdown list for each letter and enter the appropriate amount. Enter receipts as negative amounts using the minus sign.

2. Determine the amount debited to Land, Land Improvements, and Building.

3. Since land used as a plant site lose its ability to provide services, it depreciated. Land improvements lose their ability to provide services as time passes and are therefore .

4. What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $21,500 [payment (i)] was incorrectly classified as Land Improvements rather than Land? Assume Land Improvements are depreciated over a 20-year life using the double-declining-balance method.

a. Fee paid to attorney for title search $3,700 b. Cost of real estate acquired as a plant site: Land 390,300                                                                  Building (to be demolished) 37,100 c. Delinquent real estate taxes on property, assumed by purchaser 22,000 d. Cost of razing and removing building acquired in B 6,100 e. Proceeds from sale of salvage materials from old building 3,700* f. Special assessment paid to city for extension of water main to the property 14,600 g. Architect’s and engineer’s fees for plans and supervision 53,700 h. Premium on one-year insurance policy during construction 5,200 i. Cost of filling and grading land 21,500 j. Money borrowed to pay building contractor 915,200* k. Cost of repairing windstorm damage during construction 6,700 l. Cost of paving parking lot to be used by customers 18,500 m. Cost of trees and shrubbery planted 11,000 n. Cost of floodlights installed on parking lot 1,300 o. Cost of repairing vandalism damage during construction 3,000 p. Proceeds from insurance company for windstorm and vandalism damage 7,300* q. Payment to building contractor for new building 975,700 r. Interest incurred on building loan during construction 45,900 s. Refund of premium on insurance policy (h) canceled after 11 months 433*

Explanation / Answer

Item Account Amount($) a. Land 3,700 b. Land 390,300 b. Building 37,100 c. Land 22,000 d. Land 6,100 e. Land -3,700 f. Land 14,600 g. Building 53,700 h. Building 5,200 i. Land 21,500 j. Other Accounts -915,200 k. Other Accounts 6,700 l. Land Improvements 18,500 m. Land 11,000 n. Land Improvements 1,300 o. Other Accounts 3,000 p. Other Accounts -7,300 q. Building 975,700 r. Building 45,900 s. Building -433

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.