The Following Expenditures Are Related to Land, Land Improvements and Buildings

question 128

Essay

The following expenditures are related to land, land improvements and buildings which were acquired on 1 November 2009. $$\begin{array} { | l | r | } \hline \text { Cost of real estate acquired for a new manufacturing plant } & \$ 365,000 \\\hline { \text { The land is appraised for } \$ 262,800 \text { and the building for } \$ 102,200 . } & \\\hline \text { Real estate taxes paid by the purchaser } & \$ 20,000 \\\hline \text { Cost of removing a barn } & \$ 8,500 \\\hline \text { Architect's fees for updating building } & \$ 6,750 \\\hline \text { Attorney's fees for closing sale } & \$ 12,500 \\\hline \text { Grading land } & \$ 3,500 \\\hline \text { Paving parking lot } & \$ 7,000 \\\hline \text { Planting trees and shrubs } & \$ 9,250 \\\hline \text { cost of repairs to building due to storm during construction } & \$ 1,300 \\\hline \text { Lights placed on driveway } & 4750 \\\hline \text { Fee to real estate broker } & \$ 2,500 \\\hline & \\\hline\end{array}$$ Required:
Determine the cost of the land, the building and the improvements (Round to the nearest dollar)
Prepare journal entries on 31 December 2009 for depreciation assuming the building will have a useful life of 20 years and no residual value. Use double declining balance method and the half-year convention. Depreciate the land improvements using straight-line method, a 5 year life, to the nearest month with zero residual value (to the nearest dollar).

Comprehend the role of property rights in resolving disputes over external costs and benefits.

Evaluate the consequences of government policies on market equilibrium, prices, and output levels.

Identify the differences between private, social, and marginal costs and benefits.

Appreciate the significance of negotiating solutions in externalities and the Coase theorem.

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