Comprehensive At December 31, 2018, certain accounts included in theproperty, plant, and equipment section of Townsand Company's balancesheet had the following balances: LandBuildingsLeasehold improvementsMachinery and equipment $100,000800,000500,000700,000 During 2019, the following transactions occurred: 1. Land site number 621 was acquired for $1,000,000. Additionally,to acquire the land, Townsand paid a $60,000 commission to a realestate 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 $5,000.2. A second tract of land (site number 622) with a building wasacquired for $300,000. The closing statement indicated that theland 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 feesArchitectural design feesBuilding permit fee $11,0008,0001,000 The building was completed and occupied on September 29, 2019.3. A third tract of land (site number 623) was acquired for $600,000and was put on the market for resale.4. Extensive work was done to a building occupied by Townsandunder a lease agreement that expires on December 31, 2028. Thetotal cost of the work was $125,000, which consisted of the following: Painting of ceilings Electrical work Construction of extension to current working area $ 10,000 (estimated useful life is 1 year) 35,000 (estimated useful life is 10 years) 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.5. During December 2019, costs of $65,000 were incurred toimprove leased office space. The related lease will terminate onDecember 31, 2021, and is not expected to be renewed.6. A group of new machines was purchased under a royaltyagreement that provides for payment of royalties based on units of production for the machines. The invoice price of the machineswas $75,000, freight costs were $2,000, unloading charges were$1,500, and royalty payments for 2019 were $13,000. Required:1. Prepare a detailed analysis of the changes in the balance sheet accounts-Land, Buildings, Leasehold Improvements, andMachinery and Equipment-for 2019. Disregard the relatedaccumulated depredation accounts.2. List the items in the fact situation that were not used todetermine the answer to Requirement 1, and indicate where, or if,these items should be included in Townsand's financial statements.
Comprehensive At December 31, 2018, certain accounts included in the
property, plant, and equipment section of Townsand Company's balance
sheet had the following balances:
| Land Buildings Leasehold improvements Machinery and equipment |
$100,000 800,000 500,000 700,000 |
During 2019, the following transactions occurred:
1. 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.
2. 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 Architectural design fees Building permit fee |
$11,000 8,000 1,000 |
The building was completed and occupied on September 29, 2019.
3. A third tract of land (site number 623) was acquired for $600,000
and was put on the market for resale.
4. Extensive work was done to a building occupied by Townsand
under a lease agreement that expires on December 31, 2028. The
total cost of the work was $125,000, which consisted of the following:
|
Painting of ceilings Electrical work Construction of extension to current working area |
$ 10,000 (estimated useful life is 1 year) 35,000 (estimated useful life is 10 years) 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.
5. During December 2019, costs of $65,000 were incurred to
improve leased office space. The related lease will terminate on
December 31, 2021, and is not expected to be renewed.
6. 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 2019 were $13,000.
Required:
1. Prepare a detailed analysis of the changes in the balance sheet accounts-Land, Buildings, Leasehold Improvements, and
Machinery and Equipment-for 2019. Disregard the related
accumulated depredation accounts.
2. List the items in the fact situation that were not used to
determine the answer to Requirement 1, and indicate where, or if,
these items should be included in Townsand's financial statements.
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