Chapter 9 ACCT

Exam 3

purchase price of land

cost of land

closing costs

• such as title to the land, attorneys fees, commission to real estate agents, and recording fees

cost of land

costs incurred to get land in condition for its intended use

• cost of grading, filling, draining and cleaning

cost of land

assumption to any liens, mortgages, or encumbrances

cost of land

additional land improvements that have an INDEFINITE life

cost of land

how should the costs associated with furnishing inside a building be recorded?

as an equipment cost

land investment

if the major purpose of acquiring and holding land is speculative

land inventory

if a real estate concern holds the land for resale

land improvements

structural additions made to land with limited lives

land improvement examples

driveways, parking lots, fencing, lighting, landscaping with a limited life

pavements, street lights, sewers, and drainage systems

these costs are charged to the land account because they are relatively permanent in nature. after instillation, they are maintained by the local government

land improvements have a

LIMITED life and are depreciated over their useful life

cost of equipment

are assets used in operations

equipment cost examples

store checkout counters, office furniture, factory machinery, and delivery trucks

cost of equipment includes…

all expenditures incurred in acquiring the equipment and preparing it for use

cash purchased price plus sales taxes

cost of equipment

freight or shipping charges

cost of equipment

insurance during transit paid by the purchaser

cost of equipment

assembling, installing, and testing the equipment

cost of equipment

cost of buildings

includes all expenditures related directly ro acquisition or construction

how can a building be obtained?

by purchase, construction by an independent contractor or construction by the company itself

salaries and wages of employees are only included in the cost of a self-constructed asset if…

the employees are directly involved with construction

payment for construction from note proceeds

building acquired

cost of land fill and clearing

land

premium on 6-month insurance policy during construction

building acquired

refund of 1-month insurance premium because construction completed early

(building acquired)

architects fee on building

building acquired

cost of real estate purchases as a plant site

land

commission fee paid to real estate agency

land

installation of fences around property

land improvements

cost of razing and removing building

land

proceeds from salvage and demolished building

(land)

cost of parking lots and driveways

land improvements

cost of trees and shrubbery (permanent)

land

excavation cost of new building

building acquired

interest on the construction land is considered part of the

cost of the asset