Question

acquire land, make earning Objectives 1, 2 > Problems Group A P10-30A Determining asset cost and recording partial-year depreciation straight-line Discount Parking near an airport, incurred the following costs to acquire land land improvements, and construct and furnish a small building: 1. Bldg. $461,100 a. Purchase price of three acres of land b. Delinquent real estate taxes on the land to be paid by Discount Parking c. Additional dirt and earthmoving d. Title insurance on the land acquisition e. Fence around the boundary of the property f. Building permit for the building 9. Architect's fee for the design of the building h. Signs near the front of the property 1. Materials used to construct the building 1. Labor to construct the building k. Interest cost on construction loan for the building 1. Parking lots on the property m. Lights for the parking lots $80,000 6,300 9,000 3,200 9,600 1,000 20,700 9,300 215,000 175,000 9,400 28,500 11,200 50,000 n. Salary of construction supervisor (80% to building; 20% to parking lot and concrete walks) 11,200 o. Furniture p. Transportation of furniture from seller to the building 2,200 4. Additional fencing 6,600 Discount Parking depreciates land improvements over 15 years, buildings over 40 years, and furniture over 10 years, all on a straight-line basis with zero residual value.

1. set up collumns for land land improvements building and furniture show how to account for each cost by listing the cost under the correct account determine the total cost of each asset

2. all construction was complete and the assets were placed in service on october 1 record partial- year deprecation expence for the year ended december 31 round to the nearest dollar

Answer 1

ANSWER

As per the given question,

STEP -1

Tangible assets that are long-lived assets like land, building, equipment, furniture etc. which are used by a business in its operations, come under Property, plant and equipment. Recording of plant assets is based on the cost principle, as per which assets and services should be recorded at their actual cost.

STEP-2

Determine the amount accounted to land, land improvements, buildings and furniture in the following manner

Item Land Land improvements Building Furniture а Гъ $80,000 $6,300 $9.000 $3,200 $9,600 $1,000 $20.700 $9,300 $215,000 $175,000 $9,400 $28,500 $11.200 $10,000 $40,000 (20 : 80 $11,200 $2.200 $6,600 $75,200 Total $98,500 $461,100 $13,400

Therefore, the amount accounted to land , land improvements, building, and furniture is $98,500; $75,200; $461,100; and 13,400.

NOTE: The salary of the construction supervisor for $ 50,000 is assigned 20%to land improvements (20%*$ 50,000=$10,000), and the remaining 80% to the land (80%*$50,000=$40,000)

Record the partial-year depreciation expense for the year assuming the assets places in service on October 01, in the following manner: Date Credit Debit $1,253 Account Title and Explanation 31-Dec Depreciation expense- Land improvements Accumulated depreciation- Land improvements (To record the depreciation expense for 3 months from October to December) $1,253 $2,882 $2,882 | 31-Dec Depreciation expense- Buildings Accumulated depreciation- Buildings (To record the depreciation expense for 3 months from October to December) 31-Dec Depreciation expense- Furniture $335 Accumulated depreciation - Furniture $3351 (To record the depreciation expense for 3 months from October to December) Therefore, the depreciation expense for Land improvements, Buildings, and Furniture is $1,253; $2,882; $335 respectively. Note: Land does not depreciate.

Working note: Compute the depreciation expense in the following manner: Cost - Residual value3 months Xmonths Depreciation expense (Land improvements) = Useful life $75,200 - $0 3 15 years 12 = $1,253 Cost - Residual value Depreciation expense (Building) = lue x months 3 Useful life 12 $461,100 - $0 3 (Building) - Cost - Refu months 40 year = $2,882 Depreciation expense (Furniture) == Cost - Residual value 3 $13,400 - $0 3 -X months 10 years *12 = $335 Useful life months

Therefore, the depreciation expense for Land improvements, Buildings, and Furniture is $1,253; $2,882; $335 respectively. Note: The assets have been depreciated using the straight-line method where the useful life for Land-improvements, Buildings, and Furniture is 15 years, 40 years, and 10 years respectively. Also, the amounts have been rounded to the nearest dollar.