Selected accounts included in the property, plant, and equipment section of Nash
ID: 2566836 • Letter: S
Question
Selected accounts included in the property, plant, and equipment section of Nash Corporation’s balance sheet at December 31, 2016, had the following balances.
(a) Calculate the balance at December 31, 2017 in each of the following balance sheet accounts. (Hint: Disregard the related accumulated depreciation accounts.)
Land,land improvements, buildings, equipment
for the balance on december 31,2017
Selected accounts included in the property, plant, and equipment section of Nash Corporation’s balance sheet at December 31, 2016, had the following balances.
Land $444,000 Land improvements 207,200 Buildings 1,628,000 Equipment 1,420,800During 2017, the following transactions occurred. 1. A tract of land was acquired for $222,000 as a potential future building site. 2. A plant facility consisting of land and building was acquired from Mendota Company in exchange for 29,600 shares of Nash’s common stock. On the acquisition date, Nash’s stock had a closing market price of $37 per share on a national stock exchange. The plant facility was carried on Mendota’s books at $162,800 for land and $473,600 for the building at the exchange date. Current appraised values for the land and building, respectively, are $340,400 and $1,021,200. 3. Items of machinery and equipment were purchased at a total cost of $592,000. Additional costs were incurred as follows. Freight and unloading $19,240 Sales taxes 29,600 Installation 38,480 4. Expenditures totaling $140,600 were made for new parking lots, streets, and sidewalks at the corporation’s various plant locations. These expenditures had an estimated useful life of 15 years. 5. A machine costing $118,400 on January 1, 2009, was scrapped on June 30, 2017. Double-declining-balance depreciation has been recorded on the basis of a 10-year life. 6. A machine was sold for $29,600 on July 1, 2017. Original cost of the machine was $65,120 on January 1, 2014, and it was depreciated on the straight-line basis over an estimated useful life of 7 years and a salvage value of $2,960.
(a) Calculate the balance at December 31, 2017 in each of the following balance sheet accounts. (Hint: Disregard the related accumulated depreciation accounts.)
Land,land improvements, buildings, equipment
for the balance on december 31,2017
Explanation / Answer
(a) NASH CORPORATION
Analysis of Land Account
2017
Balance at January 1, 2017................................
$ 444,000
Plant facility acquired from Mendota
Company—portion of fair value allocated to
land (Schedule 1)..............................................
273,800
Balance at December 31, 2017..........................
$ 717,800
NASH CORPORATION
Analysis of Land Improvements Account
2017
Balance at January 1, 2017................................
$ 207,200
Parking lots, streets, and sidewalks................
140,600
Balance at December 31, 2017..........................
$ 347,800
NASH CORPORATION
Analysis of Buildings Account
2017
Balance at January 1, 2017................................
$1,628,000
Plant facility acquired from Mendota
Company—portion of fair value allocated to
building (Schedule 1).......................................
821,400
Balance at December 31, 2017..........................
$2,449,400
NASH CORPORATION
Analysis of Equipment Account
2017
Balance at January 1, 2017................................
$1,420,800
Cost of new equipment acquired
Invoice price................................................
$592,000
Freight and unloading costs....................
19,240
Sales taxes..................................................
29,600
Installation costs........................................
38,480
679,320
$2,100,120
Deduct cost of equipment disposed of
Equipment scrapped June 30, 2017...
$ 118,400*
Equipment sold July 1, 2017................
65,120*
183,520
Balance at December 31, 2017......................
$1,916,600
*The accumulated depreciation account can be ignored for this part of the problem.
Schedule 1
Computation of Fair Value of Plant Facility Acquired from
Mendota Company and Allocation to Land and Building
29,600 shares of NASH common stock at $37 quoted
market price on date of exchange (29,600 X $37)
$1,095,200
Allocation to land and building accounts in proportion
to appraised values at the exchange date:
Amount
Percentage
of total
Land
$340,400
25
Building
1,021,200
75
Total
$1,361,600
100
Land
($1,095,200 X 25%)
$273,800
Building
($1,095,200 X 75%)
821,400
Total
$1,095,200
(a) NASH CORPORATION
Analysis of Land Account
2017
Balance at January 1, 2017................................
$ 444,000
Plant facility acquired from Mendota
Company—portion of fair value allocated to
land (Schedule 1)..............................................
273,800
Balance at December 31, 2017..........................
$ 717,800
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