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.


  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

LandLand ImprovementsEquipmentBuildingsChecksum
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 earthmoving8,300$8,300
Title insurance on the land acquisition3,400$3,400
Fence around the boundary of the property9,400$9,400
Building permit for the building1,200$1,200
Architect’s fee for the design of the building20,600$20,600
Signs near the front of the property9,200$9,200
Materials used to construct the building241,000$241,000
Labor to construct the building172,000$172,000
Interest cost on construction loan for the building13,200$13,200
Parking lots on the property28,800$28,800
Lights for the parking lots10,600$10,600
Salary of construction supervisor (80% to building; 20% to parking lot and concrete walks)40,000$40,000
Furniture and equipment110,000$110,000
Transportation of furniture and equipment from seller to the building5,200$5,200
Additional fencing6,000$6,000
TOTAL PROJECT COSTS$769,400$0$0$0$0$769,400

Part 2

Dec31Depreciation Expense – Land Improvements
Depreciation Expense – Equipment
Depreciation Expense – Building
Accumulated Depreciation
To record partial year depreciation on new assets