Crane Flight Academy acquired a new site for its training operations. The company was able to find a small unused airport with an updated runway and hangar that could be used to accommodate a flight simulator, small aircraft, and classrooms. The location was ideal as it was close to the city centre with a large population base from which to attract students. Crane paid $6.60 million to acquire the site. Prior to providing financing for the purchase, the bank required that an appraisal be completed of the property. The evaluation appraisal report came back with the following estimated market values: land $3,364,200, building $2,429,700, and land improvements $436,100. Crane management explained, to the bank's satisfaction, that it paid the $370,000 premium because of the property's proximity to the city centre and access to a large population base from which to draw students. (a1) Allocate the $6.60-million purchase price to the land, building, and land improvements. Land Building Land improvements '$ $ $ Allocated cost

Crane Flight Academy acquired a new site for its training operations. The company was able to find a small unused airport with an updated runway and hangar that could be used to accommodate a flight simulator, small aircraft, and classrooms. The location was ideal as it was close to the city centre with a large population base from which to attract students. Crane paid $6.60 million to acquire the site. Prior to providing financing for the purchase, the bank required that an appraisal be completed of the property. The evaluation appraisal report came back with the following estimated market values: land $3,364,200, building $2,429,700, and land improvements $436,100. Crane management explained, to the bank's satisfaction, that it paid the $370,000 premium because of the property's proximity to the city centre and access to a large population base from which to draw students. (a1) Allocate the $6.60-million purchase price to the land, building, and land improvements. Land Building Land improvements '$ $ $ Allocated cost

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Due to increased demand for local deliveries in Western Sydney, Metro Deliveries Ltd leased a truck…

A: Under Lease accounting the present value of all the minimum lease payments are recorded as the lease…

Q: Riverbed's Accounting Museum is exploring the purchase of a new building with a useful life of 15…

A: Payback period (PBP) refers to the period or duration within which the company is able to recover…

Q: Warrick Water Company, a privately owned business, supplies water to several communities. Warrick…

A: The cost of asset is only recognized when it will flow future economic benefit to the entity and the…

Q: Dwight Donovan, the president of Vernon Enterprises, is considering two investment opportunities.…

A: Project A:Initial capital expenditure = $108,000Annual expected cash inflow = $41,719Project…

Q: Company A purchased a corner lot five years ago at a cost of $134000. The lot was recently appraised…

A: Building cost$126,000Lot purchases cost$134,000Lot recently appraised by$119,000Amount spent on…

Q: Swifty’s Accounting Museum is exploring the purchase of a new building with a useful life of 20…

A: Calculate the total savings per year:Given:Cost of the building is $1,369,200Savings from the…

Q: Larkspur Brothers Inc. purchased land and an old building with the intention of removing the old…

A: Net revenue, also known as net sales or net income, is the amount of revenue generated by a company…

Q: The Tenth National Bank had taken possession of a shopping mall in foreclosure of a mortgage. When…

A: PLEASE LIKE THE ANSWER, YOUR RESPONSE MATTERS The asbestos problem was clearly overseen by the…

Q: Friendly Tests Inc. is a commercial testing lab, performing a variety of lab tests for hospitals in…

A: Net present value refers to the method of capital budgeting which is calculated by taking the…

Q: Proposal 1 requires dredging the canal. The state is planning to purchase the dredging equipment and…

A: Annual Worth (AW) is easy to understand by anyone familiar with annual amounts because for example,…

Q: Tuas Limited (“Tuas”) is considering to replace its existing air-conditioning system with an energy…

A: Investment Recommendation for Tuas LimitedBased on the provided information, Tuas Limited should…

Q: The Square Market has decided to expand its retail store by building on a vacant lot it currently…

A: Net present value method: Net present value method id the method which is used to compare the…

Q: Sheridan Flight Academy acquired a new site for its training operations. The company was able to…

A: A company may acquire multiple assets at a time by paying a single sum of money, Thus, it requires…

Q: I need help with this: New Haven Corporation recently identified an investment opportunity…

Q: Determine your budget variance and what type it is. Provide a short explanation that can be given…

A: Rio Grande Medical Center has made expansion plans and in order to create the required space, are…

Q: Humphry Incorporated currently produces boat sails and is considering expanding its operations to…

A: Acquisition cost of land = $250,000Current value of land = $405,000Cost of grading and excavation =…

Q: Sweets Inc. made several capital purchases during the last month of the year. As part of the…

A: Journal entries in the books of Sweet Inc., Amount in $ Date Particulars Dr Cr…

Q: Riley Co. purchased a parcel of land six years ago for $768,500. At that time, the firm invested…

A: In decision making activity we considered only the present value of the asset.Historical costs or…

Q: Rogers Inc. is considering expanding into the sports drink business with a new product. Assume that…

A: Capital budgeting The method of helping investors make decisions related to long-term investing is…

Question

Crane Flight Academy acquired a new site for its training operations. The company was able to find a small unused airport with an
updated runway and hangar that could be used to accommodate a flight simulator, small aircraft, and classrooms. The location was
ideal as it was close to the city centre with a large population base from which to attract students. Crane paid $6.60 million to acquire
the site. Prior to providing financing for the purchase, the bank required that an appraisal be completed of the property. The evaluation
appraisal report came back with the following estimated market values: land $3,364,200, building $2,429,700, and land improvements
$436,100. Crane management explained, to the bank's satisfaction, that it paid the $370,000 premium because of the property's
proximity to the city centre and access to a large population base from which to draw students.
(a1)
Allocate the $6.60-million purchase price to the land, building, and land improvements.
Land
Building
Land improvements
'$
Allocated cost

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define Land improvments

VIEW

Step 2: Excel snip is as follows-

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Accounting for Property, Plant and Equipment

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Gemma Company is a midsize manufacturing company with 120 employees and approximately $45 million in sales. Management has established a set of processes to purchase fixed assets, described in the following paragraphs: When a user department decides to purchase a new fixed asset, the departmental manager prepares an asset request form. When completing the form, the manager must describe the fixed asset, the advantages or efficiencies offered by the asset, and estimates of costs and benefits. The asset request form is forwarded to the director of finance. Personnel in the finance department review estimates of costs and benefits and revise these if necessary. A discounted cash flow analysis is prepared and forwarded to the vice president of operations, who reviews the asset request forms and the discounted cash flow analysis, and then interviews user department managers if he or she feels it is warranted. After this review, she selects assets to purchase until she has exhausted the…
i need the answer quickly
Sharkey's Fun Center contains a number of electronic games as well as a miniature golf course and various rides located outside the building. Paul Sharkey, the owner, would like to construct following information about the slide: water slide on one portion of his property. Mr. Sharkey gathered the a. Water slide equipment could be purchased and installed at a cost of $345,000. According to the manufacturer, the slide would be usable for 12 years after which it would have no salvage value. b. Mr. Sharkey would use straight-line depreciation on the slide equipment. c. To make room for the water slide, several rides would be dismantled and sold. These rides are fully depreciated, but they could be sold for $117,500 to an amusement park in a nearby city. d. Mr. Sharkey concluded that about 50,000 more people would use the water slide each year than have been using the rides. The admission price would be $3.80 per person (the same price the Fun Center has been charging for the old rides).…
CH Kilo Inc. is evaluating a proposal to supply warehouse space to a potential customer as well as maintain all the required warehouse records. Kilo has a storage barn not currently in use; however, it will require the installation of additional shelving and a special concrete pad for delivery truck access Kilo's existing accountant will assume the additional accounting duties and receive an additional $8,000 per annum. The potential customer will pay a fee to Kilo based on the volume of product stored. Required: Which of the following items is not a relevant consideration in deciding whether Kilo should provide the warehouse space to the potential customer? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer, Any boxes left with a question mark will be automatically graded as incorrect.) Original purchase price of the storegeben…
Sailcloth & More currently produces boat sails and is considering expanding its operations to include awnings for homes and travel trailers. The company owns land beside its current manufacturing facility that could be used for the expansion. The company bought this land 5 years ago at a cost of $495,000. At the time of purchase, the company paid $64,000 to level out the land so it would be suitable for future use. Today, the land is valued at $545,000. The company currently has some unused equipment on its books at a depreciated value of $66,000 – this equipment could be sold for $48,000. Alternatively, this equipment could be used for producing awnings if $28,000 is spent for modifications. Other new equipment costing $610,000 will also be required for the expansion. What is the amount of the initial cash flow for this expansion project?
XYZ Inc., the Calapan-based computer manufacturer, has developed a new all-in-one device: phone, music-player, camera, GPS, and computer. The device is called the iPip. The following data have been collected regarding the iPip project. The company has identified a prime piece of real estate and must purchase it immediately for $100,000. In addition, R&D expenditures of $175,000 must be made immediately. During the first year the manufacturing plant will be constructed. The plant will be ready for operation at the end of Year 1. The construction costs are $500,000 and will be paid upon completion. At the end of the Year 1, an inventory of raw materials will be purchased costing $50,000. Production and sales will occur during years 2 and 3. (Assume that all revenues and operating expenses are received (paid) at the end of each year.) Annual revenues are expected to be $850,000. Fixed operating expenses are $100,000 per year and variable operating expenses are 25% of sales. The…
Sarasota Inc., manufactures ice tea and would like to increase its market share in the North. In order to do so, Sarasota has decided to locate a new factory in the Cedar Rapid area. Sarasota will either buy or lease a site depending upon which is more advantageous. The site location committee has narrowed down the available sites to the following three buildings: Building A: Purchase for a cash price of $1,540,000, useful life 26 years. Building B: Lease for 26 years with annual lease payments of $124,000 being made at the beginning of the year. Building C: Purchase for $1,952,000 cash. This building is larger than needed; however, the excess space can be sublet for 26 years at a net annual rental of $18,300. Rental payments will be received at the end of each year. Sarasota Inc. has no aversion to being a landlord. Click here to view factor tables In which building would you recommend that Sarasota Inc. locate, assuming a 10% cost of funds? (Round factor values to 5 decimal places,…
Black Motors, Ltd. recently entered the automobile industry by introducing its first fully electric vehicle, the Bolt. The Bolt is the first of many planned vehicles Black will produce. In order to expand its product line, Black requires a state-of-the-art testing facility and a new research and development laboratory Assume that Black Motors, Ltd. reports under IFRS. Assume all the conditions to capitalize development costs have been met. Any development costs are amortized over 3 years.. Requirement a. Prepare the journal entries to record each of the transactions, assuming all purchases were made with cash. Assume the transactions occurred on January 1. Black Motors, Ltd. recently entered the automobile industry by introducing its first fully electric vehicle, the Bolt. The Bolt is the first of many planned vehicles Black will produce. In order to expand its product line, Black requires a state-of-the-art testing facility and a new research and development laboratory.…
Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane. THSI will lease space in this facility to various agencies and groups providing relief services to the area. THSI estimates that this project will initially cost $4 million to set up and will generate $20 million in revenues during its first and only year in operation (paid in one year). Operating expenses are expected to total $8 million during this year and depreciation expense will be another $2 million. THSI will require no working capital for this investment. THSI's tax-rate is 20% Assume that THSI's cost of capital for this project is 15%. The net present value (NPV) of this temporary housing project is closest to:
A civil engineer who owns his own design/build/operate company purchased a small crane 3 years ago at a cost of $65,000. At that time, it was expected to be used for 10 years and then traded in for its salvage value of $10,000. Due to increased construction activities, the company would prefer to trade for a new, larger crane now, which will cost $80,000. The company estimates that the old crane can be used, if necessary, for another 3 years, at which time it would have a $17,000 estimated market value. Its current market value is estimated to be $29,000, and if it is used for another 3 years, it will have M&O costs (exclusive of operator costs) of $17,000 per year. Determine the values of P, n, S, and AOC that should be used for the existing crane in a replacement analysis. The value of P is $ . The value of n is years. The value of S is $ . The AOC value is $ per year.
Sweets Inc. made several capital purchases during the last month of the year. As part of the purchases the company sold some existing fixed assets. Yesterday, as you were walking to the compnay cafeteria, you saw the President of Sweets Inc. While walking the President you mentioned the recent capital purchases would significantly impact the financial statments. Today, the President called you directly and asked you to write a memorandum explaining the impact of the capital purchases (and related sales of some existing fixed assets) on each of the following financial statments; Income Statement, Balance Sheet, Statement of Cash Flows. Summary of December Capital Transactions On Dec 1, 2021 Sweets Inc purchased a new delivert truck for $100,000 The following additional information was provided: The truck was paid for with cash. The truck is expected to have a service life of 10 years. No salvage value is expected after the service life. The company uses straight line depreciation for…
(Accounting for Self-Constructed Assets) Troopers Medical Labs, Inc., began operations 5 years ago producing stetrics, a new type of instrument it hoped to sell to doctors, dentists, and hospitals. The demand for stetrics far exceeded initial expectations, and the company was unable to produce enough stetrics to meet demand.The company was manufacturing its product on equipment that it built at the start of its operations. To meet demand, more efficient equipment was needed. The company decided to design and build the equipment, because the equipment currently available on the market was unsuitable for producing stetrics.In 2017, a section of the plant was devoted to development of the new equipment and a special staff was hired. Within 6 months, a machine developed at a cost of $714,000 increased production dramatically and reduced labor costs substantially. Elated by the success of the new machine, the company built three more machines of the same type at a cost of $441,000…