P10-1 (L01) Classification of Acquisition and Other Asset Costs At December 31,
ID: 2567110 • Letter: P
Question
P10-1 (L01) Classification of Acquisition and Other Asset Costs At December 31, 2016, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet had the following balances Land Buildings Leasehold improvements Machinery and equipment $ 230,000 890,000 660,000 875,000 During 2017, the following transactions occurred 1. Cost of land site number 621 acquired Commission to a real estate agent to acquire land Cost of clearing land Sale of timber and gravel that were recovered during the land clearing $ 850,000 51,000 35,000 13,000 2. Second tract of land (site number 622) with a building Land value as indicated on the closing statement Building value as indicated on the closing statement Cost of demolition of the building shortly after acquisition Cost of new building constructed Additional costs of constructing building: $ 420,000 300,000 120,000 41,000 330,000 Excavation fees Architectural design fees Building permit fees Imputed interest on funds used during construction (stock financing) 38,000 11,000 2,500 8,500 Sept. 30, 2017 Completion and occupancy date of building 3. Acquisition of a third tract of land (site number 623) (Put on the market for resale) 4. Costs of improving leased office during December 2017. The related lease will 650,000 $ 89,000 terminate on December 31, 2019, and is not expected to be renewed (Hint: Leasehold improvements should be handled in the same manner as land improvements.) Purchase of a group of new machines under a royalty agreement that provides for payment of royalties based on units of production for the machines 5. Invoice price of the machines Freight costs Installation costs Royalty payments for 2017 $ 87.000 3,300 2,400 17,500 (AICPA adapted) Instructions: (a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2017 Land Buildings Leasehold Improvements quiomelated accumulated depreciatio Disregard the related accumulated depreciation accounts REAGAN COMPANYExplanation / Answer
(a) REAGAN COMPANY
Analysis of Land Account
for 2017
Balance at January 1, 2017........................
$ 230,000
Land site number 621
Acquisition cost.........................................
$850,000
Commission to real estate agent..................
51,000
Clearing costs.............................................
$35,000
Less: Amounts recovered..........................
13,000
22,000
Total land site number 621............
923,000
Land site number 622
Land value.................................................
300,000
Building value...........................................
120,000
Demolition cost.........................................
41,000
Total land site number 622............
461,000
Balance at December 31, 2017...................
$1,614,000
REAGAN COMPANY
Analysis of Buildings Account
for 2017
Balance at January 1, 2017.................
$ 890,000
Cost of new building constructed
on land site number 622
Construction costs.....................
$330,000
Excavation fees...........................
38,000
Architectural design fees..........
11,000
Building permit fee......................
2,500
381,500
Balance at December 31, 2017..........
$1,271,500
REAGAN COMPANY
Analysis of Leasehold Improvements Account
for 2017
Balance at January 1, 2017...............................
$660,000
Office space.........................................................
89,000
Balance at December 31, 2017.........................
$749,000
REAGAN COMPANY
Analysis of Equipment Account
for 2017
Balance at January 1, 2017...............................
$875,000
Cost of the new equipment acquired
Invoice price..............................................
$ 87,000
Freight costs.............................................
3,300
Installation costs......................................
2,400
92,700
Balance at December 31, 2017.........................
$967,700
(a) REAGAN COMPANY
Analysis of Land Account
for 2017
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