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Question One. The costs incurred by Noriega Company to acquire land and construct a building were as follows: i. Land k150,000,000 ii. Construction...

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Accounting

Question One.
The costs incurred by Noriega Company to acquire land and constructa building
were as follows:

i.

Land

k150,000,000

ii.

Construction insurance

k3,500,000

iii.

Delinquent tax paid on the land

k 5,000,000

iv.

Building construction contract

k 220,000,000

v.

Architect Fees

k2,000,000

vi.

Street and side Walk installation

k4,000,000

vii.

Excavation Costs

k3,100,000

viii.

Property Tax on land (pro to construction)

k1,600,000

ix.

Interest cost on loan to pay contract

k2,600,000


Requirements:
a. Determine the cost of land
b. Determine the cost of the building ( 3 Marks)
c. Assuming the residue value of the building is K60,000,000 andthat the
economic life is Ten years, compute Noriega LTD Company’sdepreciation
expense for Year 1, Year 2, Year 3 under the followingmethods
i. Straight line Method
ii. Double Declining Method
iii. The Sum of Years Digit (SYD) Method ( 2 Marks)
d. At the beginning of Year 4, Noriega LTD Company incurred anadditional
Cost of K10, 000,000 in order to add a new wing to the building; asa result
the salvage value of the building is increased by k5, 000,000 andalso
increased the remaining life of the building by 2 years.

i. Re- Calculate the depreciation for the next two years usingthe straight
line method. ( 3 Marks)

Answer & Explanation Solved by verified expert
4.3 Ratings (793 Votes)
a COST AMOUNT CATEGORY OF EXPENSES Land 150000000 land Construction insurance 3500000 building Delinquent tax paid on the land 5000000 land Building construction contract 220000000 building Architect Fees 2000000 building Street and side Walk installation 4000000 land Excavation Costs 3100000 building Property Tax on land pro to construction 1600000 land Interest cost on loan to pay contract    See Answer
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