USA Fixed Assets - Bldg Improvements

[E. Dantes]

How do you account for a building improvement in the following situation:

Let's say an addition is being built to a building and while the construction is being done, there are capitalizable broker fees, architect fees, and other fees that are being incurred and paid for. Should these fees be added to the fixed asset listing individually as they are paid, or should they wait to be lumped with the all of the costs of the project once it's finalized and then added as one single line item on the fixed asset listing?

 

[Patrickaa]

I Think, since that addition is going to add value to the building, it should be to the cost of the asset since that would be considered as a capital expenditure.
Thank you

 

[E. Dantes]

So are you saying not to record each capitalizable cost individually on the fixed asset listing, and just record the total cost of the project as one item? If so, what is the debit side of the journal entry when those capitalizable fees are paid?

 

[ArcSine]

Two common reasons for setting up a particular expenditure with its own line on the fixed asset schedule:

1. It will have a depreciation method / life / start date that's different from the other components of the overall "master" asset of which it's a component.
2. It's physically separable and hence subject to a possible future sale, abandonment, or other disposition.

A third reason I had in mind a minute ago has drifted away, but I'm too lazy to think of it at the moment; still, these'll suffice for now. Neither of these apply with respect to the broker fees, architect fees, .....

Hence, consider just debiting them all to a single "Improvements" account, each debit occurring as the expenditure is incurred. Then this single asset "Improvements" will be depreciated as a unit, beginning when the improvements are first placed in service.