Question
At December 31, 2015, certain accounts included in the property, plant, and equipment section of Townsand Company's balance sheet had the following balances: Land $100,000
At December 31, 2015, certain accounts included in the property, plant, and equipment section of Townsand Company's balance sheet had the following balances:
Land | $100,000 | |
Buildings | 800,000 | |
Leasehold improvements | 500,000 | |
Machinery and equipment | 700,000 |
During 2016, the following transactions occurred:
Land site number 621 was acquired for $1,000,000. Additionally, to acquire the land, Townsand 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.
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, 2016.
A third tract of land (site number 623) was acquired for $600,000 and was put on the market for resale.
Extensive work was done to a building occupied by Townsand under a lease agreement that expires on December 31, 2025. The total cost of the work was $125,000, which consisted of the following:
Painting of ceilings | $ 10,000 | (estimated useful life is 1 year) |
Electrical work | 35,000 | (estimated useful life is 10 years) |
Construction of extension to current working area | 80,000 | (estimated useful life is 30 years) |
$125,000 |
The lessor, Steinbeck Company, paid one-half of the costs incurred in connection with the extension to the current working area.
During December 2016, costs of $65,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2018, and is not expected to be renewed.
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 2016 were $13,000.
Required:
Prepare a detailed analysis of the changes in the balance sheet accounts-Land, Buildings, Leasehold Improvements, and Machinery and Equipment-for 2016. Disregard the related accumulated depreciation accounts.
If a cost should not be allocated to one of the four balance sheet accounts listed, then select the "Other" column.
Cost | Account |
Land # 621 purchase price | |
Commission to real estate agent | |
Clearing costs | |
Amounts recovered for timber and gravel | |
Land site #622 purchase price | |
Demolition cost | |
Construction costs | |
Building permit fee | |
Architectural design fees | |
Excavation fees | |
Land site #623 purchase price | |
Painting of ceilings | |
Electrical work | |
Construction of extension | |
Office space work | |
Machine purchase price | |
Freight costs | |
Unloading charges | |
Royalty payments |
Determine the new ending balance for each of the following accounts:
Beginning Balance | Ending Balance | ||
Land | $100,000 | $ | |
Buildings | $800,000 | $ | |
Leasehold Improvements | $500,000 | $ | |
Machinery and Equipment | $700,000 | $ |
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