Question

chicago corporation, which uses the allowance method

Recognizing and Classifying the Cost of Long-Term Assets E2A. CONCEPT Fraser Manufacturing purchased land next to its factory to be used as a parking lot. The following expenditures were incurred by the company: purchase price, $300,000; broker's fees, $24,000; title search and other fees, $2,200; demoli- tion of a cottage on the property, $8,000; general grading of property, $4,200; paving parking lots, $40,000; lighting for parking lots, $32,000; and signs for parking lots, $6,400. Determine the amounts that should be debited to the Land account and the Land Improvements account.

Answer 1

Solution: Land account will be debited with 338,400 and Land improvement account will be debited with 78,400

Working:

Cost of land
Purchase price	300,000
Brokers fees	24,000
Title search and other fees	2,200
Demolition of cottage	8,000
Grading of property	4,200
Total cost of land	338,400
Cost of land improvements:
Parking lots	40,000
Lighting for parking lots	32,000
Signs for parking lots	6,400
Total cost of land improvements	78,400

As per policy we have to answer first question