Question

Determining asset cost and recording full-year depreciation

Road Runner High-Speed Online, Inc. incurred the following costs in acquiring it's property and equipment:

A. $250,000 - Purchase price of four acres of land, including an old building that will be used for a garage (75% to land and 25% to building).

B. $8,100 - Dirt and leveling of land.

C. $17,650 - Fence around the land.

D. $600 - Attorney fee for title search on the land.

E. $5,900 - Delinquent real estate taxes on the land to be paid by Road Runner.

F. $1,800 - Company signs at front of the company property.

G. $350 - Building permit for sales building.

H. $19,800 - Architect fee for the design of sales building.

I. $923,000 - Construction costs of sales building.

J. $41,800 - Renovation costs of the garage building.

K. $9,000 - Interest during construction on loan for sales building.

L. $6,400 - Trees and shrubs.

M. $52,300 - Parking lot and concrete walks.

N. $7,300 - Lights for the parking lot.

O. $107,100 - Furniture for the sales building.

P. $1,800 - Transportation and installation of furniture.

Q. $40,000 - Supervisory salary of the construction supervisor (85% to sales building; 9% to land improvements; and 6% to garage building).

Road Runner depreciates building over 40 years, land improvements over 20 years, and furniture over 8 years, all on a straight-line basis.

Salvage values are as follows: land improvements, $1,000; sales building, $50,000; garage building, $5,000; and furniture, $2,000.

Requirements:

1. Set up columns for Land, Land Improvements, Sales Building, Garage Building, and Furniture. Listing each cost's description then accounting for it in the appropriate column. Determine the total cost for each column.

2. All construction was complete and the assets were placed in service on 2019. Record full-year depreciation expense for the year ending December 31, 2019.

Answer 1

Particulars	Land	Land Improvements	Sales Building	Garage Building	Furniture
Purchase Price	$        187,500.00	$                              -	$                 -	$       62,500.00	$                 -
Dirt and Leveling of Land	$                         -	$                  8,100.00	$                 -	$                     -	$                 -
Fence around the land	$                         -	$                17,650.00	$                 -	$                     -	$                 -
Attorney Fee	$                600.00	$                              -	$                 -	$                     -	$                 -
Delinquent real estate taxes	$             5,900.00	$                              -	$                 -	$                     -	$                 -
Company Signs	$                         -	$                  1,800.00	$                 -	$                     -	$                 -
Building permit	$                         -	$                              -	$         350.00	$                     -	$                 -
Architect Fees	$                         -	$                              -	$   19,800.00	$                     -	$                 -
Construction Costs	$                         -	$                              -	$ 923,000.00	$                     -	$                 -
Renovation Costs	$                         -	$                              -	$                 -	$       41,800.00	$                 -
Interest on Loan	$                         -	$                              -	$     9,000.00	$                     -	$                 -
Trees and Shrubs	$                         -	$                  6,400.00	$                 -	$                     -	$                 -
Parking lot and concrete walks	$                         -	$                52,300.00	$                 -	$                     -	$                 -
Parking lot lights	$                         -	$                  7,300.00	$                 -	$                     -	$                 -
Furniture purchased	$                         -	$                              -	$                 -	$                     -	$ 107,100.00
Transportation and installation of furniture	$                         -	$                              -	$                 -	$                     -	$     1,800.00
Supervisor Salary	$                         -	$                  3,600.00	$   34,000.00	$         2,400.00	$                 -
Total Costs	$        194,000.00	$                97,150.00	$ 986,150.00	$     106,700.00	$ 108,900.00
Salvage Value		$                  1,000.00	$   50,000.00	$         5,000.00	$     2,000.00
Estimated Life (in years)		20	40	40	8
Depreciation per year = (Total Costs - Salvage Value)/Estimated Life	No depreciation on land	$                  4,807.50	$   23,403.75	$         2,542.50	$   13,362.50