The Final Word Company produces word processing software. The company recently p

Question

The Final Word Company produces word processing software. The company recently purchased a large tract of land on which will be constructed several buildings to house the production and adminis-trative personnel of the company. The following improvements are expected to be made to the land as part of the construction of the complex:

1. The roads on all sides of the land will be graded and paved.

2. Street lights will be installed.

3. Sewer and drainage systems will be installed.

4. Several private roads will be constructed on the property.

5. Sidewalks will be constructed to connect the various buildings.

6. Parking lots will be constructed at selected places on the property for employee and customer parking.

7. The property will be suitably landscaped.

Required: Explain how each of the above items would be accounted for in the records of Final Word Company.

Explanation / Answer

1.The roads on all sides of the land will be graded and paved.: Land improvements in general ledger will be treated as an Asset entitled Land Improvements. The depreciation on Land Improvements will be treated as depreciation expense.

2. Street lights will be installed: Land Improvements as an Asset Class

3. Sewer and drainage systems will be installed: Land Improvements as an Asset Class

4. Several private roads will be constructed on the property: Land Improvements as an Asset Class

5. Sidewalks will be constructed to connect the various buildings.: This will also be considered as Land Improvements General Ledger an Asset Class

6. Parking lots will be constructed at selected places on the property for employee and customer parking.: Land Improvements in General Ledger an Asset Class

7.The property will be suitably landscaped: Land Improvements as an Asset Class

The General Entry for each would be:

Dr Land Improvements (Roads and Lights)

Cr Cash or Accounts Payable.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.