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Identifying the elements of a plant asset’s cost Scissors Salons operate in several states The home office incurred the following costs to acquire land and a garage make land improvements and

Identifying the elements of a plant asset’s cost) Scissors Salons operate in several states. The home office incurred the following costs to acquire land and a garage, make land improvements, and construct and furnish the office building.

 

Purchase price of land, including a building that will be used as a garage (land market value is $150,000; building market value is $50,000)

$180,000

 

Landscaping (additional dirt and earth moving)

3,700

 

Fence around the land

3,550

 

Title insurance on the land acquisition

1,000

 

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

26,000

 

Company signs at near front and rear approaches to company property

200

 

Building permit for the office building

45,000

 

Architect fee for the design of the office building

53,550

 

Masonry, carpentry, and roofing to construct the office building

16,400

 

Renovation of the garage

322,000

 

Interest cost on construction loan for office building

234,000

 

Parking lots and concrete walks on the property

3,400

 

Lights for the parking lot, walkways, and company signs

17,450

 

Concrete, wood, and other materials used in the office building

8,900

 

Salary of construction supervisor (90% to office building, 6% to and improvements, and 4% to garage renovation)

55,000

 

Landscaping (trees and shrubs)

61,500

 

Furniture for the office building

1,300

 

Transportation of furniture from seller to the office building

9,100

Scissors Salons 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, Office Building, Garage, and Furniture. Show how to account for each of Scissors’ 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 March 29. Record depreciation for the year ended December 31.

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

May 21 2020 View more View Less

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