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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: 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: 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: 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.

BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 10, Problem 4P
Textbook Problem

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:

Chapter 10, Problem 4P, Comprehensive At December 31, 2018, certain accounts included in the property, plant, and equipment , example  1

During 2019, the following transactions occurred:

  1. 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. 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:

Chapter 10, Problem 4P, Comprehensive At December 31, 2018, certain accounts included in the property, plant, and equipment , example  2

  The building was completed and occupied on September 29, 2019.

  1. 3. A third tract of land (site number 623) was acquired for $600,000 and was put on the market for resale.
  2. 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:

Chapter 10, Problem 4P, Comprehensive At December 31, 2018, certain accounts included in the property, plant, and equipment , example  3

The lessor, Steinbeck Company, paid one-half of the costs incurred in connection with the extension to the current working area.

  1. 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.
  2. 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. 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. 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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Chapter 10 Solutions

Intermediate Accounting: Reporting And Analysis
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