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Method
2. What method yields the highest depreciation expense for 2013?
3. What method yields the most depreciation over the four-year life of the equipment?
4) The following payments and receipts are related to land, land improvements, and
building acquired for use in a wholesale ceramic business. The receipts are identified by
an asterisk.
A) Fee paid to attorney for title search..$3,600
B) Cost of real estate acquired as a plant site: Land.$720,000
Building.60,000
c) Finder fee paid to real estate agency ..23,400
d) Delinquent real estate taxes on property, assumed by purchaser..$15,000
E) Architects and engineers fees for plans and supervision.75,000
F) Cost of removing building purchased with land in (b). 10,000
G) Proceeds from sale of salvage materials from old building$3,400*
H) Cost of filling and grading land18,000
I) Premium on one-year insurance policy during construction.8,400
J)Money borrowed to pay building contractor..800,000*
K) Special assessment paid to city for extension of water main to the property
13,400
L)Cost of repairing windstorm damage during construction3,000
M)Cost of repairing vandalism damage during construction.2,000
N) cost of trees and shrubberry planted..14,000
O) Cost of paving parking lot to be used by customers..21,600
P)Interest incurred on building loan during construction.40,000
Q)Proceeds from insurances company for windstorm and vandalism damage4,500*
R)Payment to building contractor for new building..800,000
S)Refund of premium on insurance policy (i) canceled after 10 months..1400*
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 cost 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.
5) Sandblasting equipment acquired at a cost of $36,000 has an estimated residual value
of $6,000 and an estimated useful life of 10 years. It was placed in service on April 1 of
the current fiscal year, which ends on December 31. Determine the depreciation for the
current fiscal year and for the following fiscal year by (a) the straight-line method and
(b) the double-declining-balance method.