JoJo’s, Inc. is opening a new fast-food location on the outskirts of town. The company policy is to depreciate land improvements over 20 years, buildings over 40 years, and all furniture and equipment over 8 years, all on a straight-line basis using a mid-month convention with no residual value.

Instructions

1. Determine the total cost of each asset.
2. All construction was completed on October 31. Prepare the year-end journal entry to record depreciation expense assuming no depreciation has been recorded yet.

Part 1

		Land	Land Improvements	Equipment	Buildings	Checksum
Purchase price of three acres of land	$85,000					$85,000
Delinquent real estate taxes on the land to be paid by JoJo’s, Inc.	5,500					$5,500
Additional dirt and earthmoving	8,300					$8,300
Title insurance on the land acquisition	3,400					$3,400
Fence around the boundary of the property	9,400					$9,400
Building permit for the building	1,200					$1,200
Architect’s fee for the design of the building	20,600					$20,600
Signs near the front of the property	9,200					$9,200
Materials used to construct the building	241,000					$241,000
Labor to construct the building	172,000					$172,000
Interest cost on construction loan for the building	13,200					$13,200
Parking lots on the property	28,800					$28,800
Lights for the parking lots	10,600					$10,600
Salary of construction supervisor (80% to building; 20% to parking lot and concrete walks)	40,000					$40,000
Furniture and equipment	110,000					$110,000
Transportation of furniture and equipment from seller to the building	5,200					$5,200
Additional fencing	6,000					$6,000
TOTAL PROJECT COSTS	$769,400	$0	$0	$0	$0	$769,400

Part 2

		JOURNAL			Page 101
DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
20–
Dec	31	Depreciation Expense – Land Improvements
		Depreciation Expense – Equipment
		Depreciation Expense – Building
		Accumulated Depreciation
		To record partial year depreciation on new assets