(LO 1 ) (Classification of Acquisition and Other Asset Costs) At December 31, 2019, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet had the following balances. Land $230,000 Buildings 890,000 Leasehold improvements 660,000 Equipment 875,000 During 2020, the following transactions occurred. 1.Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000. 2.A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the following costs. Excavation fees $38,000 Architectural design fees 11,000 Building permit fee 2,500 Imputed interest on funds used during construction (stock financing) 8,500 The building was completed and occupied on September 30, 2020. 3.A third tract of land (site number 623) was acquired for $650,000 and was put on the market for resale. 4.During December 2020, costs of $89,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2022, and is not expected to be renewed. (Hint: Leasehold improvements should be handled in the same manner as land improvements.) 5.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 $87,000, freight costs were $3,300, installation costs were $2,400, and royalty payments for 2020 were $17,500. Instructions a. Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2020. Land Leasehold Improvements Buildings Equipment Disregard the related accumulated depreciation accounts. b. List the items in the situation that were not used to determine the answer to (a) above, and indicate where, or if, these items should be included in Reagan's financial statements. (AICPA adapted)

(LO 1 ) (Classification of Acquisition and Other Asset Costs) At December 31, 2019, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet had the following balances. Land $230,000 Buildings 890,000 Leasehold improvements 660,000 Equipment 875,000 During 2020, the following transactions occurred. 1.Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000. 2.A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the following costs. Excavation fees $38,000 Architectural design fees 11,000 Building permit fee 2,500 Imputed interest on funds used during construction (stock financing) 8,500 The building was completed and occupied on September 30, 2020. 3.A third tract of land (site number 623) was acquired for $650,000 and was put on the market for resale. 4.During December 2020, costs of $89,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2022, and is not expected to be renewed. (Hint: Leasehold improvements should be handled in the same manner as land improvements.) 5.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 $87,000, freight costs were $3,300, installation costs were $2,400, and royalty payments for 2020 were $17,500. Instructions a. Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2020. Land Leasehold Improvements Buildings Equipment Disregard the related accumulated depreciation accounts. b. List the items in the situation that were not used to determine the answer to (a) above, and indicate where, or if, these items should be included in Reagan's financial statements. (AICPA adapted)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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P10.1

(LO 1 ) (Classification of Acquisition and Other Asset Costs) At December 31, 2019, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet had the following balances.

Land	$230,000
Buildings	890,000
Leasehold improvements	660,000
Equipment	875,000

During 2020, the following transactions occurred.

1.Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000.
2.A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the following costs.

Excavation fees

$38,000

Architectural design fees

11,000

Building permit fee

2,500

Imputed interest on funds used during construction (stock financing)

8,500

The building was completed and occupied on September 30, 2020.
3.A third tract of land (site number 623) was acquired for $650,000 and was put on the market for resale.
4.During December 2020, costs of $89,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2022, and is not expected to be renewed. (Hint: Leasehold improvements should be handled in the same manner as land improvements.)
5.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 $87,000, freight costs were $3,300, installation costs were $2,400, and royalty payments for 2020 were $17,500.

Instructions

Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2020.

Land	Leasehold Improvements
Buildings	Equipment

Disregard the related accumulated depreciation accounts.

List the items in the situation that were not used to determine the answer to (a) above, and indicate where, or if, these items should be included in Reagan's financial statements.

(AICPA adapted)

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Excavation fees	$38,000
Architectural design fees	11,000
Building permit fee	2,500
Imputed interest on funds used during construction (stock financing)	8,500