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The following expenditures are related to land, land improvements and buildings, which were acquired on November...

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Accounting

The following expenditures are related to land, landimprovements and buildings, which were acquired on November 1,2015.

Cost of real estate acquired for a new manufacturing plantS365,000 (the land is appraised for $262,800 and the building for$102,200)

Real estate taxes paid by the purchaser......$20,000

Cost of removing a barn..... $8,500

Architect's fees for updating the building..... $6750

Attorneys fees for closing the sale..... $12500

Grading land.... $3500

paving parking lot......$7000

Planting trees and shrubs.......$9250

Cost of repairs to building due to storm duringconstruction..... $1300

lights placed on driveway .... $750

fee to real estate broker..... $2500

a) determine the cost of the land, the building and theimprovements (round to nearest dollar)

b)prepare journal entries on Dec. 31, 2015 for depreciationassuming the building will have a useful life of 20 years and noresidual value. Use double declining balance method and thehalf-year convention. Depreciate the land improvements usingstraight line method, a 5 year life, to the nearest month with zeroresidual value (to the nearest dollar).

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4.2 Ratings (797 Votes)

a) determination of the costs:
Cost head land building land improvement Total
Cost of real estate 262800 102200 365000 (ratio=2.57:1)
Real estate taxes 14398 5602 20000 (ratio=2.57:1)
Barn removing cost 8500 8500
Building architect's fees 6750 6750
Attorneys fees 8999 3501 12500 (ratio=2.57:1)
Grading land 3500 3500
paving parking lot 7000 7000
Planting trees and shrubs 9250 9250
Building repairs 1300 1300
Driveway lights 750 750
Estate broker fee 1800 700                                       2500 (ratio=2.57:1)
Total 287996 127054 22000 437050
b) Journal Entries:
Date Acc. Titles Debit $ Credit $
31-Dec-15 Depreciation - Building 2118 (127054*5%*2*2/12)
Depreciation - Land Development 733 (22000*20%*2/12)
Accum. Depreciation - Building 2118
Accum. Depreciation - Land Development 733
(depreciation expense recorded on building & Development)

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