- Scan Question
- + Post
- Get Coins
On February 1, 2016, Jekel & Hyde Inc. purchased land and incurred other costs relative to the construction of a new warehouse. The costs related to the purchase of the land and the construction of the building are listed below: Purchase price of the land $231,250 Title insurance for the land $1,500 Legal fees to purchase land $1,000 Cost of razing an old building on the land to be used $8,500 for the construction of the warehouse Delinquent property taxes on the land owed by the seller $3,000 Cost of grading and filling the portion of the land on which $6,000 the warehouse will be placed. Architect fees $3,000 Building construction: Material $ 352,000 Labor $ 235,000 Insurance during construction $ 22,500 Utilities during construction $ 20,000 Avoidable Interest $ 2,500 Cost of constructing driveway $ 8,000 Cost of parking lot and fencing $12,000 Additional Information: a) To acquire the land at its fair market value and to construct the building, the company issued 25,000 of its $1 par value common stock. The stock is actively traded and its closing price on the date of issuance was $ 9.25 per share. b) Of the acres purchased, 80% of the land would be used for the construction of the warehouse and 20% of the acres would be held for future expansion or sale. c) In addition to the proceeds from the sale of the stock, cash-on-land was used for the balance of related expenditures. d) After 5 years of use, the company decided to dell the warehouse (including the land it was on). It sold for $1,000,000. The warehouse began operations on January 2, 2017. Over the 5 years, it had been depreciated properly, based on 10 yrs of useful life and a residual value of $365,000. The fencing, driveway and parking lot were depreciated based on 10 yrs useful life and no residue value. The company used the straight line method of depreciation. Required: Prepare the journal entries to record the economic events described above. You do not need to journalize the depreciation taken over the 5 yrs, which included the year of the sale.
Land and buliding need to be accounted separately even if they are acquired together. Land has an unlimited useful life where he buildings have limited useful life and therefore depreciable assets.
1. Land A/c Dr. $251250
To Cash A/c $251250
[Purchase of the land includes directly attribuable costs to the asset for its intended use]
2. Building A/c Dr. $652500
To Cash A/c $652500
3.Issued 25000, $1 stock par value
Cash A/c Dr $25000
To cash A/c $25000
4. Cash A/c Dr $2500
To Interest $2500
Interest that can be avoided cannot be capitalised to the asset construction cost.
5. 80 % asset being used for warehouse and 20% for sale . The distinguishment has to be shown in the balancesheet i.e, land held for sale has to be seggregated into current asset .No Journal entry for the same.
6. Sale of the Asset
Cost of the warehouse = Cost of the land ( 80%)+ Cost of the building depreciated for 5 years
=201000+181375 (Cost of Building includes cash from sale of land(20%))
Cash A/c Dr. $1000000
To warehouse $563750
To Profit $436250
On February 1, 2016, Jekel & Hyde Inc. purchased land and incurred other costs relative to...
Stanley Corp. incurred the following costs to accquire land, make land improvements, construct a Warehouse and purchase equipment to start operating its sporting goods business. Line 1 Cost of land 300,000 2 Attorney’s fee, land acquisition 15,000 3 Architect’s fee, building design 35,000 4 Accrued Taxes on Land 2,500 5 Construction cost of Building 975,000 6 Annual Salary of staff who supervised the construction of the building for six months 80,000 7 Interest charges on loan for building paid during...
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 ceramic business. The receipts are identified by an asterisk. $2,000 a. Fee paid to attorney for title search b. Cost of real estate acquired as a plant site: Land 285,000 Building (to be 60,000 demolished) Delinquent real estate taxes on property, assumed by purchaser 16,000 C. d. Cost of razing and removing building...
Exercise 1: On March 1, 2008, Penner Company acquired real estate on which it planned to construct a small office building. The company paid $80,000 in cash. An old warehouse on the property was razed at a cost of $8,600; the salvaged materials were sold for $1.700. Additional expenditures before construction began included $1,100 attorney's fee for work concerning the land purchase, $5,000 real estate broker's fee, $7,800 architect's fee. Instruction: Compute and journalize the acquisition cost for the land....
A company incurred the following costs: Purchase price of land Survey fees Payment for demolition of old building on land Back property taxes on land Paving costs for parking lot Fence around perimeter of land Lights in parking lot Signs for new business What is the cost of the land? $290,000 6,000 20,000 3,000 70,000 15,000 90,000 5,000 O A. $316,000 O B. $290,000 O C. $319,000 OD. $389,000
Land 6,100 Land 3,700 Building 14,600 Building 53,600 Land 5,200 Other Accounts 21,500 Other Accounts 914,600 6,700 Land Improvements Land Improvements 18,500 Land Improvements 11,000 Other Accounts 1,300 Other Accounts 3,000 Building 7,300 975,100 Building $ Building 45,800 2. Determine the amount debited to Land, Land Improvements, and Building. Land Land Improvements Building 3,000 0. Cost of repairing vandalism damage during construction Proceeds from insurance company for windstorm and vandalism damage 7,300* q. Payment to building contractor for new building...
e Cambridge Business Publishee Accounting for Long-Lived and Intangible Assets Chapter 9 PROBLEMS-SET A P9-1A. Acquisition Cost of Long-Lived Assets The following items represent expenditures (or receipts) LO1 related to the construction of a new home office for Norma Company. Cost of land site, which included an old apartment building appraised at $75,000 Legal fees, including fee for title search. .. Payment of apartment building mortgage and related interest due at time of sale Payment for delinquent property taxes assumed...
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 acquire land, make earning Objectives 1, 2 > Problems Group A P10-30A Determining asset cost and...
Safe Parking, near an airport, incurred the following cos improvements, and construct and furnish a small building he following costs to acquire land, make land a. Purchase price of three acres of land 86,000 6,300 b. Delinquent real estate taxes uent real estate taxes on the land to be paid by Safe Parking c. Additional dirt and earthmoving 8.400 3,400 d. Title insurance on the land acquisition 9.600 e. Fence around the boundary of the property 900 f. Building permit...
borden company incurred the following costs to acquire and prepare land for a new parking lot purchase price for land cost to clear the land cost of paving lighting for the parking lot and landscaping for the parking lot how should the company determine which cost to be recorded as land improvement in which should be recorded as land Borden Company incurred the following costs to acquire and prepare land for a new parking lot purchase price for land, cost...
1) A company incurred the following costs: Purchase price of land Survey fees Payment for demolition of old building on land Back property taxes on land Paving costs for parking lot Fence around perimeter of land Lights in parking lot Signs for new business $270,000 4,000 20,000 2,000 60,000 15,000 90,000 5,000 What is the cost of the land? A) $270,000. B) $296,000. C) $356,000. D) $294,000. E) None of the above. 2) Equipment costing $40,000with a book value of...