Gonzo Co. owns a building in Georgia. The building’s historical cost is $970,000, and $440,000 of accumulated depreciation has been recorded to date. During 2011, Gonzo incurred the following expenses related to the building: Repainted the building

$ 48,000

Major improvement to the plumbing

109,000

Replaced carpet in the plant’s accounting offices

47,600

Added a 7,000 square foot lobby

234,600

Repaired a broken water main

155,800

Required:

1. Which of the costs incurred by Gonzo Co. should be capitalized to the building account?

2. What is the subsequent carrying amount of the building?

1. The cost to be capitalized to building account is $343,600

2. The subsequent carrying amount of the building is $873,600

Explanation:

1. In order to calculate the which of the costs incurred by Gonzo Co. should be capitalized to the building account we would have to use the following formula:

cost to be capitalize=Major improvement to the plumbing+Added a loby

cost to be capitalize=$109,000+$234,600

cost to be capitalize=$343,600

The cost to be capitalized to building account is $343,600

2. To calculate the subsequent carrying amount of the building we have to use the following formula:

subsequent carrying amount=Historical cost+improvements-Accumulated Depreciation

subsequent carrying amount=$970,000+$343,600-$440,000

subsequent carrying amount=$873,600

The subsequent carrying amount of the building is $873,600

anjan should should report alteast 5000 on the first apyment and 10,000 each year

explanation: