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Identifying the elements of a plant asset’s cost Assume Google Inc opened an office in Orlando, Florida. Further assume that Google incurred the following costs in acquiring land making land

Identifying the elements of a plant asset’s cost) Assume Google Inc. opened an office in Orlando, Florida. Further assume that Google incurred the following costs in acquiring land, making land improvements, and constructing and furnishing the new sales building:

 

Purchase price of land, including an old building that will be used for a garage (land market value is $320,000; building market value is $80,000)

$350,000

 

Landscaping (additional dirt and earth moving)

8,100

 

Fence around the land

31,600

 

Attorney fee for title search on the land

600

 

Delinquent real estate taxes on the land to be paid by Google

5,900

 

Company signs at entrance to the property

1,800

 

Building permit for the sales building

300

 

Architect fee for the design of the sales building

19,800

 

Masonry, carpentry, and roofing of the sales building

516,000

 

Renovation of the garage building

41,800

 

Interest cost on construction loan for sales building

9,000

 

Landscaping (trees and shrubs)

6,400

 

Parking lot and concrete walks on the property

52,300

 

Lights for the parking lot and walkways

7,300

 

Salary of construction supervisor (85% to sales building; 9% to land improvements; and 6% to garage building renovation)

40,000

 

Office furniture for the sales building

79,400

 

Transportation and installation of furniture

1,800

Assume Google depreciates buildings over 40 years, land improvements over 20 years, and furniture over 8 years, all on a straight-line basis with zero residual value.

Required

1. Set up columns for Land, Land Improvements, Sales Building, Garage Building, and Furniture. Show how to account for each of Google’s costs 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 May 2. Record depreciation for the year ended December 31.

3. How will what you learned in this problem help you manage a business?

May 21 2020 View more View Less

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