Drive and Fly, near an airport, incurred the following cost to acquire land, make land improvements, and construct and furnish a small building:
| a. Purchase price of 3 acres of land | 82,000 |
| b. Delinquent real estate taxes on the land to be paid by Drive and fly | 6300 |
| c. Additional dirt and earth moving | 8700 |
| d. Title insurance on the Land acquisition | 3,300 |
| e. Fence around the boundary of the property | 9,800 |
| f. Building permit for the building | 700 |
| g. Architect fee’s for the design of the building | 23100 |
| h. Sign near the front of the property | 9,300 |
| i. Material used to construct the building | 218,000 |
| j. Labor to construct the building | 167,000 |
| k. Interest cost on construction loan for the building | 9,100 |
| l. Parking lot on the property | 28800 |
| m. Lights for the parking lots | 11400 |
| n. Salary for the construction supervisor (80% to the building 20% to the parking lot and concrete walks) | 70,000 |
| o. Furniture | 11,100 |
| p. Transportation of furniture from seller to the building | 2,600 |
| q. Landscaping ( shrubs) | 6200 |
Drive and fly depreciates land improvement over 20 years, buildings over 40 years, and furniture over 10 years, all on a straight-line basis with zero residual value.
Requirements:
- Set up columns 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 asset.
- All construction was complete and the assets were placed in service on July 1. Record partial-year-depreciation for the year ended December 31
answer
A)
Land Land improvements Building Furniture
Calculate total cost of Land
| Particular | Amount in $ |
| Land Purhase price | 82000 |
| Real Estate Tax | 6300 |
| Dirt and earth moving | 8700 |
| Tital Insurance | 3300 |
| Total | 100300 |
B)
Land Improvement Cost
| Particular | Amount in $ | |
| e | Fence around the boundary of the property | 9800 |
| Total | 9800 |
C)
Building cost
| Particular | Amount in $ | |
| f | Building permit for the building | 700 |
| g | Architect fee’s for the design of the building | 23100 |
| h | Sign near the front of the property | 9300 |
| i | Material used to construct the building | 218000 |
| j | Labor to construct the building | 167000 |
| k | Interest cost on construction loan for the building | 9100 |
| l | Parking lot on the property | 28800 |
| m | Lights for the parking lots | 11400 |
| n | Salary for the construction super viser | 70000 |
| Total | 537400 |
D)
Furniture cost
| Particular | Amount in $ | |
| 0 | Furniture | 11,100 |
| p | Transportation of furniture from seller to the building | 2600 |
| q | Landscaping ( shrubs) | 6200 |
| Total | 19,900 |
Calculation of depreciation is as follow
| Land Improvmnt |
Building | Furniture | |
| Cost | 9800 | 537400 | 19,900 |
| Number of year | 15 | 30 | 12 |
| Depreciation of Full year =Cost / number of Year |
653.33 | 17913.33 | 1658.33 |
| proportionate Dep = Full year dep *9/12 |
490 | 13435 | 1243.75 |
Entry for depreciation
| Particular | Debit $ | Credit $ |
| Depreciation expanses | 490 | |
| To Land Improvement | 490 | |
| Depreciation expanses | 13435 | |
| To Building | 13435 | |
| Depreciation expanses | 1243.75 | |
| To furniture | 1243.75 |
