Capitalized asset cost and partial year depreciation
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 |
80,000 |
|
b. Delinquent real estate taxes on the land to be paid by Drive and fly |
5,600 |
|
c. Additional dirt and earth moving |
9,000 |
|
d. Title insurance on the Land acquisition |
3,200 |
|
e. Fence around the boundary of the property |
9,100 |
|
f. Building permit for the building |
500 |
|
g. Architect fee’s for the design of the building |
20,700 |
|
h. Sign near the front of the property |
9,000 |
|
i. Material used to construct the building |
215,000 |
|
j. Labor to construct the building |
173,000 |
|
k. Interest cost on construction loan for the building |
9,500 |
|
l. Parking lot on the property |
29,000 |
|
m. Lights for the parking lots |
11,300 |
|
n. Salary for the construction supervisor (80% to the building 20% to the parking lot and concrete walks) |
80,000 |
|
o. Furniture |
11,600 |
|
p. Transportation of furniture from seller to the building |
2,200 |
|
q. Landscaping ( shrubs) |
6,300 |
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:
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 asset.
2. All construction was complete and the assets were placed in service on July 1. Record partial-year-depreciation for the year ended December 31.