Acc121 Survey of Accounting: P7-1 Allocate payments and receipt to fixed asset account

Acc121 Survey of Accounting
P7-1 Allocate payments and receipt to fixed asset account
The following payments and receipts are related to land, land improvements, and building acquired for use in a wholesale apparel business. The receipts are identified by an asterisk.
A) Finder’s fee paid to real estate agency 7,500
B) Cost of real estate acquired as a plant site: Land 210,000
Building 50,000
C) Fee paid to attorney for title search 2,500
D) Delinquent real estate taxes on property, assumed by purchaser 20,650
E) Cost of razing and removing building 16,250
F) Cost of filling and grading land 12,500
G) Proceeds from sale of salvage materials from old buildin 5,000
H) Architect’s and engineer’s fees for plans and supervision 36,000
I) Special assessment paid to city for extension of water main to the property 8,000
J) Premium on one-year insurance policy during construction 3,600
K) Money borrowed to pay building contractor 900,000
L) Cost of trees and shrubbery planted 18,000
M) Cost of repairing windstorm damage during construction 3,000
N) Cost of repairing vandalism damage during construction 4,200
O) Cost of paving parking lot to be used by customers 15,000
P) Proceeds from insurances company for windstorm and vandalism damage 7,000
Q) Interest incurred on building loan during construction 54,000
R) Payment to building contractor for new building 1,000,000
S) Refund of premium on insurance policy (i) canceled after 11 months 600


Instructions
1) Assign each payment and receipt to Land (unlimited life), Land Improvements, (limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows:
2) Determine the amount debited to Land, Land Improvements, and Building.
3) The cost assigned to the land, which is used as a plant site, will not be depreciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation.
Powered by