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 apparel business. The receipts are identified by an asterisk a. Fee paid to attorney for title search $3,600 b. 720,000 Cost of real estate acquired as a plant site: Land Building (to be demolished) 60,000 c. Finder's fee paid to real estate agency 23,400 d. Delinquent real estate taxes on property, assumed by purchaser 15,000 e. 75,000 f. 10,000 g. Architect's and engineer's fees for plans for new building Cost of removing building purchased with land in (b) Proceeds from sale of salvage materials from old building Cost of filling and grading land Premium on one-year insurance policy during construction 3,400* h. 18,000 8,400 i. j. 800,000* k. 13,400 I. 3,000 m. 2,000 n. 14,000 Money borrowed to pay building contractor Special assessment paid to city for extension of water main to the property Cost of repairing windstorm damage during construction Cost of repairing vandalism damage during construction Cost of trees and shrubbery planted Cost of paving parking lot to be used by customers Interest incurred on building loan during construction Proceeds from insurance company for windstorm and vandalism damage Payment to building contractor for new building Refund of premium on insurance policy (i) canceled after 10 months 0. 21,600 p. 40,000 9. 4,500* 800,000 S. 1,400*

Answer 1

	Land	Land Improvements	Building	Other Accounts
a.	3600
b.	372300
c.	19100
d.	5400
e.	-3200
f.	12700
g.			46700
h.			4500
i.	18700
j.				-797200
k.				5900
l.		16100
m.		9600
n.		1100
o.				2600
p.				-6400
q.			849900
r.			39900
s.			-375

Answer to Q.1.
		Land
		Improvement
Fees Paid to attornet for title search	3600	Land
Cost of Real Estate Acquired as plant site	780000	Land
Finders fees paid to real estate agency	23400	Land
Delinquent real estate taxes on property, assumed by purchaser	15000	Land
Architect's and engineers fees for plans and supervission	75000	Building
Cost of Removing building purchase with Land	10000	Land
Proceeds from sale of salvage materials from old building	-3400	Land
Cost of filling and Grading Land	18000	Land
Premium on one year insurance policy during construction	8400	Building
Money Borowed to pay building contractor	-800000	other accounts
Special Assessment paid to city for extension of water main to the property.	13400	Land
Cost of reparing windstorm damage during construction	3000	other accounts
Cost of Reparing Vandalism Damage during construction	2000	other accounts
Cost of trees and Shrubbery planted	14000	Land improvement
Cost of Paving parking lot to be used by customer	21600	Land improvement
Interest Incurred on Building loan during construction	40000	building
Proceeds from insurance company for windstorm and vandalism damage	-4500	other accounts
Payment to Building Contractor for new building	800000	building
Refund of premium cancelled	-1400	building
Answer to 2
Amount Debited to:
Land	860000
Land Improvement	35600
Building	922000

Answer 3.

Blank 1 - does not

Blank 2 - is not

Blank 3 - do

Blank 4 - depreciated

Answer 4.

Net income would be overstated by 4320 on income statement

o balance sheet, land would be overstated by 21600 and land improvements would be understated by 17280