Analyzing Multiple Acquisition Scenarios

At December 31, 2020, accounts in the property, plant, and equipment section of Hine Inc.'s balance sheet had the following balances.

Land	$600,000
Buildings	1,300,000
Leasehold improvements	800,000
Equipment	1,600,000

During 2021, the following transactions occurred. 1. Land site #101 is acquired for $3 million. To acquire the land, Hine pays a $180,000 commission to a real estate agent. Costs of $30,000 are incurred to clear the land. During the course of clearing the land, timber and gravel are recovered and sold for $16,000. 2. A second tract of land (site #102) with a building is acquired for $600,000. The closing statement indicates that the land value is $400,000 and the building value is $200,000. Shortly after acquisition, the building is demolished at a cost of $40,000. A new building is constructed for $300,000 plus the following costs.

Excavation fees	$12,000
Architectural design fees	6,000
Building permit fee	4,000

Actual interest was $12,500 and avoidable interest was $10,000 during the construction period. The building was completed and occupied on September 30, 2021. 3. A third tract of land (site #103) is acquired for $1,500,000 and is put on the market for resale. 4. Extensive work is done to a building occupied by Hine under a lease agreement that expires on December 31, 2030. The total cost of the work was $250,000 and consisted of the following (the lessor paid half the costs incurred for the extension to the current working area).

Item	Estimated Cost	Useful Life (years)
Painting of ceilings	10,000	1
Electrical work	90,000	10
Construction of extension to current working area	150,000	25
	250,000

5. During December 2021, $120,000 is spent to improve leased office space. The related lease will terminate on December 31, 2024, and is not expected to be renewed. 6. A group of new machines is purchased under a royalty agreement, which provides for payment of royalties based on units of production for the machines. The invoice price of the machines was $270,000, freight costs were $2,000, unloading costs were $3,000, and royalty payments for 2021 were $44,000.

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a. Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2021: land, buildings, leasehold improvements, and equipment. Ignore the related accumulated depreciation accounts. Note: If a line isn't required in the statement, leave the amount blank (zero). Note: Do not use any negative signs with your answers. $ 600,000 Land Balance at January 1, 2021 Land site number 101: Acquisition cost $ 3,000,000 Commission to real estate agent 180,000 Clearing costs 30,000 Less amounts recovered 16,000 Total land site number 101 Land site number 102: Land value 400,000 Building value 200,000 Demolition cost 40,000 Total land site number 102 Land site number 103 3,794,000 x 640,000 1,500,000 x $ 5,934,000 x Balance at December 31, 2021 $ 1,300,000 Buildings Balance at January 1, 2021 Cost of new building on site 102: Construction costs $ Excavation fees Architectural design fees Capitalized interest Building permit fee Total cost of new building on site 102 Balance at December 31, 2021 300,000 12,000 6,000 10,000 4,000 332,000 $ 1,632,000 Leasehold Improvements Balance at January 1, 2021 Painting of ceiling Electrical work Construction of extention to work area 10,000 x 9,000 X 6,000 x 25,000 x Office space Balance at December 31, 2021 $ $ OX Equipment Balance at January 1, 2021 $ Invoice price Freight costs Unloading charges Royalty payments Balance at December 31, 2021 $ 270,000 2,000 3,000 44,000 x 319,000 x b. List items from transactions 1 through 6, which were not used to determine the balances in part a, and when applicable indicate where these items are included in Hine's financial statements. Note: If all items were included in part a, select "N/A" for the item and the financial statement classification. Leave the amount blank ($0). Item Amount Financial Statement Classification 1 N/A 0 N/A 2 N/A 0 X N/A - $ X $ x 3 N/A A X $ 0 X N/A 4 x 4 N/A - * $ 0 X N/A X 5 N/A $ 0 N/A 6 N/A X $ 0 X N/A