At December 31, 2013, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet had the following balances.

Land

Buildings

Leasehold improvements

Equipment

$230,000

890,000

660,000

875,000

During 2014, the following transactions occurred.

1. Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000.

2. A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the following costs.

Excavation fees$38,000

Architectural design fees11,000

Building permit fees2,500

Imputed interest on funds used

During construction ( stock financing )8,500

The building was completed and occupied on September 30, 2014.

3. A third tract of land (site number 623) was acquired for $650,000 and was put on the market for resale.

4. During December 2014, costs of $89,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2016 and is not expected to be renewed. (Hint: Leasehold improvements should be handled in the same manner as land improvements.)

5. 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 $87,000, freight costs were $3,300, installation costs were $2,400, and royalty payments for 2014 were $17,500.

Required

(a) Make a detailed analysis of the changes in each of the following balance sheet accounts for 2014.

LandLeasehold Improvements

BuildingsEquipment

Disregard the related accumulated depreciation accounts.

b) Pass the necessary journal entries.