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    self storage purchased​ land, paying cash as a down payment and signing a note payable for the balance. also had to pay delinquent property tax of ​, title insurance costing ​, and to level the land and remove an unwanted building. the company paid to add soil for the foundation and then constructed an office building at a cost of . it also paid for a fence around the​ property, for the company sign near the property​ entrance, and for lighting of the grounds.

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    get self storage purchased​ land, paying cash as a down payment and signing a note payable for the balance. also had to pay delinquent property tax of ​, title insurance costing ​, and to level the land and remove an unwanted building. the company paid to add soil for the foundation and then constructed an office building at a cost of . it also paid for a fence around the​ property, for the company sign near the property​ entrance, and for lighting of the grounds. from EN Bilgi.

    Afton Self Storage purchased land, paying $150,000 cash as a down payment and signing a $150,000 note payable for the balance. Afton also had to pay delinquent property tax of $2,000, title insurance costing $2,500, and $6,000 to level the land and remove

    Answer to: Afton Self Storage purchased land, paying $150,000 cash as a down payment and signing a $150,000 note payable for the balance. Afton...

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    Afton Self Storage purchased land, paying $150,000 cash as a down payment and signing a $150,000 note payable for the balance. Afton also had to pay delinquent property tax of $2,000, title insurance costing $2,500, and $6,000 to level the land and remove an unwanted building. The company paid $50,000 to add soil for the foundation and then constructed an office building at a cost of $1,000,000. It also paid $65,000 for a fence around the property, $10,400 for the company sign near the property entrance, and $6,000 for the lighting of the grounds.

    Determine the cost of Afton's land, land improvements, and building.

    Capitalized cost:

    The fixed assets of the company provide future benefits to the company regarding their production activities due to which the cost is incurred and spent by using these assets for more than one year is called capitalized cost.

    Answer and Explanation:

    1.

    Total Purchase Price of Land

    =

    Cash for Down Payment

    + Notes Payable = $ 150 , 000 + $ 150 , 000 = $ 300 , 000

    Total Purchase Price of Land=Cash for Down Payment+Notes Payable=$150,000+$150,000=$300,000

    2.

    Capitalized Cost of Land

    =

    Total Purchase Price of Land

    +

    Payment for Delinquent Property Tax

    +

    Amount of Title Insurance

    +

    Cost of Removing the Building

    = $ 300 , 000 + $ 2 , 000 + $ 2 , 500 + $ 6 , 000 = $ 310 , 500

    Capitalized Cost of Land=Total Purchase Price of Land+Payment for Delinquent Property Tax+Amount of Title Insurance+Cost of Removing the Building=$300,000+$2,000+$2,500+$6,000=$310,500

    The capitalized cost of land is $310,500.

    3.

    Capitalized Cost of Land Improvements

    = Cost Paid for Fence +

    Cash Paid for Property Entrance

    +

    Cash Paid for Lighting of the Grounds

    = $ 65 , 000 + $ 10 , 400 + $ 6 , 000 = $ 81 , 400

    Capitalized Cost of Land Improvements=Cost Paid for Fence+Cash Paid for Property Entrance+Cash Paid for Lighting of the Grounds=$65,000+$10,400+$6,000=$81,400

    The capitalized cost of land improvements is $81,400.

    4.

    Capitalized Cost of Building

    = Cost Paid for Soil +

    Cash Paid for Construction of Office Building

    = $ 50 , 000 + $ 1 , 000 , 000 = $ 1 , 050 , 000

    Capitalized Cost of Building=Cost Paid for Soil+Cash Paid for Construction of Office Building=$50,000+$1,000,000=$1,050,000

    The capitalized cost of building is $1,050,000.

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    Comparing the Effects of Capitalizing & Expensing

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    Chapter 8 / Lesson 4

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    Expensing and capitalizing are methods for recording a company's financial statements. In this lesson, learn to distinguish between capitalizing and expensing, and recognize when to do each.

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    HW7/HW8 211 Flashcards & Practice Test

    Start studying HW7/HW8 211. Learn vocabulary, terms, and more with flashcards, games, and other study tools.

    HW7/HW8 211

    16 studiers in the last day

    Which statement is true?

    Click card to see definition 👆

    A)Gross profit is the excess of sales revenue over cost of goods sold.

    B) The Sales account is used to record only sales on account.

    C) A service company purchases products from suppliers and then sells them.

    D) Purchase returns and allowances increase the net amount of purchases.

    Click again to see term 👆

    COGS will appear on which financial statement?

    Click card to see definition 👆

    D) Income Statement A) Balance sheet B) Statement of R/E

    C)Statement of cash flows

    Click again to see term 👆

    1/23 Created by matthew_soldati3

    Terms in this set (23)

    Which statement is true?

    A)Gross profit is the excess of sales revenue over cost of goods sold.

    B) The Sales account is used to record only sales on account.

    C) A service company purchases products from suppliers and then sells them.

    D) Purchase returns and allowances increase the net amount of purchases.

    COGS will appear on which financial statement?

    D) Income Statement A) Balance sheet B) Statement of R/E

    C)Statement of cash flows

    How is inventory classified in the financial statements?

    A) Asset

    B)As a contra account to Cost of Goods Sold

    C) As a liability D) As a revenue E) As an expense

    When applying the lower-of-cost-or-market rule to inventory, "market" generally means

    C) Current replacement cost

    A) Original cost, less physical deterioration

    B) Resale Value

    C) Current Replacement Cost

    During a period of rising prices, the inventory method that will yield the highest net income and asset value is

    A) FIFO B)LIFO C)Average cost

    D)Specific identification

    Which statement is true?

    D. Application of the lower-of-cost-or-market rule often results in a lower inventory value.

    A. The inventory method that best matches current expense with current revenue is FIFO.

    B. When prices are rising, the inventory method that results in the lowest ending inventory value is

    FIFO.

    C. An error overstating ending inventory in 2016 will understate 2016 net income.

    The ending inventory of Sag Harbor Co. is $68,000. If the beginning inventory was $56,000 and goods available (cost of goods available for sale) totaled $113,000, the COGS is?

    C)$45,000 A. $57,000. B. $56,000. C. $45,000. D. $101,000.

    **Available - Ending

    Basket Co. had COGS of $110,000. The beginning and ending inventories were $8,000 and $13,000, respectively. Purchases for the period must have been?

    E)$115,000 A. $123,000. B. $105,000. C. $118,000. D. $131,000.

    **COGS+Ending-Beginning

    Eagle Co. had a $26,000 beginning inventory and a $32,000 ending inventory. Net sales were $153,000; Purchases $71,000; purchase returns and allowances $4000; and freight in $7000. What is COGS?

    B) $68,000 A. $71,000. B. $68,000. C. $80,000. D. $86,000.

    **Beginning + purchases + freight-in - ending - returns/allowances

    Iron Co. had a $24,000 beg inventory and a $27,000 ending inventory. Net sales were $171,000; purchases $76,000; purchase returns/allowances $3000; freight in $9,000. COGS is $79,000. What is their gross profit percentage? (Round to nearest integer)

    C) 54% A. 46% B. 16%. C. 54% D. 14%

    **(Sales - COGS) / Sales

    Beginning inventory is $100,000; purchases are $280,000; and sales total $430,000. The normal gross profit is 45%. Using the gross profit method, how much is ending

    inventory? B) $143,500 A. $56,500 B. $143,500 C. $193,500 D. $150,000

    **(Sales - COGS) / Sales = 0.45

    **COGS + End - Beg = $280,000

    **Plug in what you got

    Dawson Drums prepares budgets to help manage the company. Dawson Drums is budgeting for the fiscal year ended Jan 31, 2016. During the preceding year ended Jan 31, 2015, sales totaled 9,900 million and COGS was $6,900mil. At Jan 31, 2015, Inventory was 1,500 million. During the upcoming 2016 year, suppose DD expects COGS to increase by 10%. The company budgets next year's ending inventory at $1,800 million.

    One of the most important decisions a manager makes is how much inventory to buy. How much inventory should purchase during the upcoming year to

    reach its budget?

    $7,890 million worth of inventory

    **C + E - B = Purchases

    **COGS here = 2015 COGS + Increase

    Burleson Inc. purchased a tract of land, a small office building, and some equipment for $1,450,000. The appraised value of the land was $798,000, the building $722,000, and the equipment $380,000. What is the cost of the land?

    B) $609,000 A. $798,000 B. $609,000 C. $483,333

    D. None of the above

    **Add all MVs,

    **Divide land MV by that number= %

    **Purchase cost x % = Cost of land

    Pawtucket Self Storage purchased land, paying $180,000 cash as a down payment and signing a $195,000 note payable for the

    balance. also had to pay delinquent property tax of $1500, title insurance costing $3500, and $12,000 to level the land and remove an unwanted building. The company paid $59,000 to add soil for the foundation and then constructed an office building at a cost of $850,000. It also paid for a $49,000 fence around the property, $10,000 for the company sign near the property entrance, and $11,000 for lighting of the grounds.

    Source : quizlet.com

    Procedures for Capitalizing Fixed Assets

    Land Land is generally considered to have an unlimited life and is therefore a non-depreciable asset. Land acquired by the institution should be recorded at its original cost which includes a variety of expenditures related to its acquisition and its preparation for use as intended by the institution. The following are examples of expenditures that should be capitalized as a

    Procedures for Capitalizing Fixed Assets

    Procedures for Capitalizing Fixed Assets Land

    Land is generally considered to have an unlimited life and is therefore a non-depreciable asset. Land acquired by the institution should be recorded at its original cost which includes a variety of expenditures related to its acquisition and its preparation for use as intended by the institution. The following are examples of expenditures that should be capitalized as a part of the cost of land:

    The original acquisition price.

    Commissions related to the acquisition.

    Legal fees related to the acquisition.

    Cost of surveys.

    Cost of an option to buy the acquired land.

    Cost of removing unwanted buildings from the land, less any proceeds from salvage.

    Unpaid taxes (to the date of acquisition) assumed by the institution.

    Cost of permanent improvements (e.g. landscaping) and improvements that will later be maintained and replaced by other governments (e.g. street lights, sewers).

    Cost of getting the land in condition for its intended use, such as excavation, grading, filling, draining, and clearing.

    Land acquired through forfeiture should be capitalized at the total amount of all taxes, liens, and other claims surrendered, plus all other costs incidental to acquiring ownership and perfecting title. Assumption of liens, mortgages, or encumbrances on the property increases the purchase price and should be included in the original cost. A liability should be recognized for the amount of the lien, mortgage, or encumbrance assumed by the institution.

    Land acquired by donation, or the intent to donate, e.g., for one dollar, should be recorded on the basis of an appraisal of the market value at the date of acquisition. The cost of the appraisal itself, however, is expensed at the time incurred.

    Costs incurred but the land is not acquired should be expensed.

    Land held for investment purposes should be classified as investments rather than as property.

    Land Improvements

    Expenditures for land improvements that have limited lives should be capitalized in a separate account from the Land and depreciated over their estimated useful lives. Examples of land improvements include, but are not limited to, site improvements such as landscaping that has a limited life (e.g. shrubbery, flowers, trees); retaining walls, parking lots, fencing, sidewalks, sculptures, and art work. Land improvements are normally depreciated over a useful life of 20 years.

    Special Note: As assets near the end of their estimated lives, the estimates should be reviewed for accuracy of the original estimate and adjusted to reflect the anticipated number of years of continued use. Any adjustment of estimated lives is a change in accounting estimate and should be applied to current and future depreciation calculations.

    Leasehold Improvements

    Leasehold improvements include improvements to existing or new leased spaces. These improvements should be capitalized if the cost exceeds $50,000 and the cost is borne by the institution. Leasehold improvements are generally depreciated over the lesser of the original term of the lease or the useful life of the improvements. If the lease contains an option to renew for additional years but renewal is uncertain or the likelihood of renewal is uncertain, the improvements should be depreciated over the original term of the lease or the useful life of the improvement.

    Buildings

    The cost of a building includes all necessary expenditures to acquire or construct and prepare the building for its intended use. Buildings consist of relatively permanent structures, including all permanently attached fixtures, machinery and other appurtenance that cannot be removed without damaging the building or the item itself. Buildings are erected for the purpose of sheltering persons or property. Examples include, but are not limited to such items as academic buildings, dormitories, apartments, barns, etc. All buildings costing $100,000 and above should be capitalized. Buildings costing less than $100,000 should be expensed. Buildings are normally depreciated over a useful life of 40 years.

    Buildings acquired by purchase should be capitalized at their original cost. The following major expenditures are capitalized as part of the cost of buildings:

    The original bargained purchase price of the building.

    Cost of renovation necessary to prepare the building for its intended use.

    Cost of building permits related to renovation.

    Unpaid taxes (to date of acquisition) assumed by the institution.

    Legal and closing fees.

    Buildings acquired by construction should be capitalized at their original cost. The following major expenditures are capitalized as part of the cost of buildings:

    Cost of constructing new buildings, including material, labor, and overhead.

    Cost of excavating land in preparation for construction.

    Cost of plans, blueprints, specifications, and estimates related to construction.

    Cost of building permits.

    Architectural and engineering fees.

    Landscaping and other improvements related to the building construction that cannot be separately identified from the building project (e.g. wiring within the building, shrubbery and sidewalks around the building).

    Buildings acquired by donation, or the intent to donate, e.g. for one dollar, should be recorded on the basis of an appraisal of the market value at the date of acquisition. The cost of the appraisal itself, however, should not be capitalized.

    Source : www.tbr.edu

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