At December 31, 2014, certain accounts included in the Noncurrent Operating Assets section of Salvino Company's balance
Question:
At December 31, 2014, certain accounts included in the Noncurrent Operating Assets section of Salvino Company's balance sheet had the following balances:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . $150,000
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...910,000
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 500,000
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...600,000
During 2015, the following transactions occurred.
(a) Land site 653 was acquired for $1,600,000. Additionally, to acquire the land, Salvino paid a $90,000 commission fee to a real estate agent. Costs of $25,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $20,000.
(b) A second tract of land (site 654) with a building was acquired for $700,000. The closing statement indicated that the land value was $510,000 and the building value was $215,000. Shortly after acquisition, the building was demolished at a cost of $30,000. A new building was constructed for $600,000 plus the following costs:
Excavation fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,000
Architectural design fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000
Building permit fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Imputed interest on funds used during construction . . . . . . . . . . . . . . . . ....... . . . . . 60,000
The building was completed and occupied on September 30, 2015.
(c) A third tract of land (site 655) was acquired for $600,000 and was put on the market for resale.
(d) Extensive work was done to a building occupied by Salvino under a lease agreement that expires on December 31, 2021. The total cost of work was $150,000, which consisted of the following.
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The lessor paid half of the costs incurred in connection with the extension to the current working area.
(e) During December 2015, costs of $70,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2017, and is not expected to be renewed.
(f) 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 $90,000, freight costs were $2,000, unloading charges were $2,500, and royalty payments for 2015 were $13,000.
Instructions:
1. Prepare an analysis of the changes in each of the following balance sheet accounts for 2015.
(Disregard the related accumulated depreciation accounts.)
Land
Buildings
Leasehold Improvements
Machinery and Equipment
2. List the items in the preceding information that were not used to determine the answer to (1), and indicate where, if at all, these items should be included in Salvino's financial statements.
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...
Step by Step Answer:
1 2 Items that were not used to determine the answer to 1 and where or if these items should be incl...View the full answer
