Question

The following expenditures are related to land, land improvements, and buildings acquired for use in a business enterprise. Determine how they should be classified (building/land or both and direct or indirect).

1. Money borrowed to pay building contractors:
2. Payment for construction from note proceeds:
3. Cost of land fill and clearing:
4. Delinquent real estate taxes on property assumed:
5. Premium on 6-month insurance policy during construction
6. Refund of 1-month insurance premium because construction completed early
7. Architect’s fees on building
8. Cost of real estate purchased – land $200,000 and building $50,000
1. Commission fees paid to a real estate agent
10. Installation of fences around the property
11. Cost of razing and removing the old building
50. Proceeds from salvage of the old building
1000. Costs of parking lots and driveways
14. Cost of trees and other debris:

Answer 1

Solution

a) Other accounts (275,000) notes payable

b) Buildings 275,000

c) Land 10,000

d) Land 7,000

e) Buildings 6,000

f) Buildings (1,000)

g) Buildings 25,000

h) Land 250,000

i) Land 9,000

j) Land improvement 4,000

k) Land 11,000

l) Land (5,000)

m) Buildings 13,000

n) Land improvement 19,000

o) Land 14,000

p) Buildings 3,000