Question: P9-36B Determining asset cost and recording partial-year depreciation
Safe Parking, near an airport, incurred the following costs to acquire land, make land improvements, and construct and furnish a small building:
a | Purchase price of three acres of land | $86,000 |
b | Delinquent real estate taxes on the land to be paid by safe parking | 6,300 |
c | Additional dirt and earth removing | 8,400 |
d | Title insurance and the land acquisition | 3,400 |
e | Fence around the boundary of the property | 9,600 |
f | Building permit for building | 900 |
g | Architect’s fee for design of building | 20,100 |
h | Signs near the front of property | 9,000 |
i | Material used to construct the building | 217,000 |
J | Labor to construct the building | 172,000 |
k | Interest cost on construction loan for the building | 9,500 |
l | Parking lots on the property | 29,400 |
m | Lights for parking lots | 11,600 |
n | Salary of construction supervisor(80% to building; 20% to parking lot and concrete walks) | 80,000 |
o | Furniture | 11,700 |
p | Transportation of furniture from seller to the building | 1,900 |
q | Additional fencing | 6,900 |
Safe Parking depreciates land improvements over 15 years, buildings over 40 years, and furniture over 10 years, all on a straight-line basis with zero residual value.
Requirements
1. 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.
2. 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.
