Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

تمرين 29

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 apparel business. The receipts are identified by an asterisk.

Instructions
1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows:

2. Determine the amount debited to Land, Land Improvements, and Building.
3. The costs assigned to the land, which is used as a plant site, will not be depreciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation.
4. What would be the effect on the current year's income statement and balance sheet if the cost of paving the parking lot of $21,600 [payment (o)] was incorrectly classified as Land rather than Land Improvements Assume that Land Improvements are depreciated over a 10-year life using the double-declining-balance method.