Chapter 7

Question 1

Leasehold improvements

Answer 1

-Improvements made to leased property
-Depreciated or amortized over the lease form

Question 2

Cost of equipment

Answer 2

-Purchasing price (minus any discounts)
-Transportation from seller
-Insurance while in transit
-Sales and other taxes
-Purchase commission
-Installation costs
-Expenditures to test the asset before placed in service
-Cost of any special platforms

Question 3

How would you journalize the cost of purchasing a preexisting building?

Answer 3

Debit the cost to the building and credit the payment

Question 4

Cost of purchasing a preexisting building

Answer 4

-Purchase price
-Brokerage commission
-Sales and other taxes
-Expenditures to repair and renovate building for its intended use/purpose

Question 5

How would you journalize interest on money borrowed to finance construction?

Answer 5

The interest would get debited to the building account, and the credit would be whatever the payment method was/is

Question 6

Cost of constructing a building

Answer 6

-Building permits
-Architectural fees
-Contractors’ charges
-Payment for material , labor, and overhead
-Interest on money borrowed to finance construction

Question 7

What is included in land improvements?

Answer 7

-Fencing
-Paving
-Security systems
-Lighting
-Sprinkler systems
-Other similar items

Question 8

What is included in land costs?

Answer 8

-Purchase price
-Brokerage commission
-Survey fees
-Legal fees
-Back property taxes
-Expenditures for grading and clearing land
-Removing any unwanted buildings

Question 9

How do you calculate netbook value?

Answer 9

Asset at its cost - its accumulated depreciation

Question 10

How do you calculate net loss/gain

Answer 10

Net book value - selling price