At December 31, 2012, certain accounts included in the property, plant, and equipment section of Towns and

Question:

At December 31, 2012, certain accounts included in the property, plant, and equipment section of Towns and Company's balance sheet had the following balances:

Land ...............................$100,000

Buildings ...........................800,000

Leasehold improvements .........500,000

Machinery and equipment .......700,000

During 2013, the following transactions occurred:

1. Land site number 621 was acquired for $1,000,000. Additionally, to acquire the land, Towns and paid a $60,000 commission to a real estate agent. Costs of $15,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $5,000.

2. A second tract of land (site number 622) with a building was acquired for $300,000. The closing statement indicated that the land value was $200,000 and the building value was $100,000. Shortly after acquisition, the building was demolished at a cost of $30,000. A new building was constructed for $150,000 plus the following costs:

Excavation fees ......................$11,000

Architectural design fees ..............8,000

Building permit fee .....................1,000

The building was completed and occupied on September 29, 2013.

3. A third tract of land (site number 623) was acquired for $600,000 and was put on the market for resale.

4. Extensive work was done to a building occupied by Towns and under a lease agreement that expires on December 31, 2022. The total cost of the work was $125,000, which consisted of the following:

At December 31, 2012, certain accounts included in the property,

The lessor, Steinbeck Company, paid one-half of the costs incurred in connection with the extension to the current working area.
5. During December 2013, costs of $65,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2015, and is not expected to be renewed.
6. A group of new machines was purchased under a royalty agreement that provides for payment of royalties based on units of production for the machines. The invoice price of the machines was $75,000, freight costs were $2,000, unloading charges were $1,500, and royalty payments for 2013 were $13,000.
Required:
1. Prepare a detailed analysis of the changes in the balance sheet accounts-Land, Buildings, Leasehold Improvements, and Machinery and Equipment-for 2013. Disregard the related accumulated depreciation accounts.
2. List the items in the fact situation that were not used to determine the answer to Requirement 1, and indicate where, or if, these items should be included in Towns and's financial statements.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...