Horngren's Accounting (12th Edition)
12th Edition
ISBN: 9780134486444
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 10, Problem P10.36BPGB
Determining asset cost and recording partial-year
Learning Objectives 1, 2
1. Bldg. $483,500
Safe Parking, near an airport, incurred the following costs to acquire land, make land improvements, and construct and furnish a small building:
| Purchase price of three acres of land | $ 86,000 |
| Delinquent real estate taxes on the land to be paid by Discount Parking | 6,300 |
| Additional dirt and earthmoving | 8,400 |
| Title insurance of the land acquisition | 3,400 |
| Fence around the boundary of the property | 9,600 |
| Building permit for the building | 900 |
| Architect’s fee for the design of the building | 20,100 |
| Signs near the front of the property | 9,000 |
| Materials used to construct the property | 217,000 |
| Labor to construct the property | 172,000 |
| Interest cost on construction loan for the building | 9,500 |
| Parking lots on the property | 29,400 |
| Lights for the parking lots | 11,600 |
| Salary of construction supervisor (80% to building; 20% to parking lot and concrete walls) | 80,000 |
| Furniture | 11,700 |
| Transportation of furniture from seller to the building | 1,900 |
| Additional fencing | 6,900 |
Safe Parking depreciates land improvements over 15 years, building 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 each asset.
- All construction was complete and the assets were placed in service on September 1. Record partial-year depreciation expense for the year ended December 31. Round to the nearest dollar.
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Determining the cost of assets
Learning Objective 1
Land $365,000
Lavallee Furniture purchased land, paying $95,000 cash plus a $260,000 note payable. In addition, Lavallee paid delinquent property tax of $3,000, title insurance costing $2,000, and $5,000 to level the land and remove an unwanted building. The company then constructed an office building at a cost of $450,000. It also paid $55,000 for a fence around the property, $16,000 for a sign near the entrance, and $7,000 for special lighting of the grounds.
Requirements
Determine the cost of the land, land improvements, and building.
Which of these assets will Lavallee depreciate?
ng Objective 1
S10-1 Determining the cost of an asset
Highland Clothing purchased land, paying $96,000 cash and signing a $300,000 note
payable. In addition, Highland paid delinquent property tax of $1,100, title insurance
costing $600, and $4,600 to level the land and remove an unwanted building. Record
the journal entry for purchase of the land.
Connect: Cha... 6
Table 9.7 Modified ACRS depreciation allowances
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Property Class
Year
3-Year
5-Year
7-Year
Check my work
1
33.33%
20.00%
14.29%
2
44.45
32.00
24.49
3
14.81
19.20
17.49
4
7.41
11.52
12.49
An asset used in a four-year project falls in the five-year MACRS class
(MACRS schedule) for tax purposes. The asset has an acquisition cost of
$7,200,000 and will be sold for $1,620,000 at the end of the project. If
the tax rate is 24 percent, what is the aftertax salvage value of the
asset?
Note: Do not round intermediate calculations and round your answer
to the nearest whole number, e.g., 32.
7
5
11.52
8.93
6
5.76
8.92
8.93
8
4.46
Aftertax salvage value
Chapter 10 Solutions
Horngren's Accounting (12th Edition)
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