On January 2, 2018, Randy Corporation acquired a track of land that is to be sold in the ordinaryconduct of business. The purchase price of the property of P50 million was paid in cash and a totaltransaction costs of P500,000 related to the acquisition of the property was also paid at a later date.The land was subdivided into 2,000 lots (200 square meter for every lot) for an additional cost ofP5,500,000. On December 31, 2018, the market value of the lot was P1,500 per square meter.As of December 31, 2018, only 20,000 square meters are still unsold and market value of the lot hadincreased to P1,600 square meter. On this date, Randy Corporation decided to transfer theremaining lots into investment property that is to be carried under the fair value model. There wasno additional cost incurred on the change of intention on the property. What amount of gain shouldRandy Corporation recognize as a result of the transfer?

Name: On January 2, 2018, Randy Corporation acquired a track of land that i
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: On January 2, 2018, Randy Corporation acquired a track of land that is to be sold in the ordinaryconduct of business. The purchase price of the property of P50 million was paid in cash and a totaltransaction costs of P500,000 related to the acquisit

Business

Accounting

On January 2, 2018, Randy Corporation acquired a track of land that is to be sold in the ordinary conduct of business. The purchase price of the property of P50 million was paid in cash and a total transaction costs of P500,000 related to the acquisition of the property was also paid at a later date. The land was subdivided into 2,000 lots (200 square meter for every lot) for an additional cost of P5,500,000. On December 31, 2018, the market value of the lot was P1,500 per square meter.

On January 2, 2018, Randy Corporation acquired a track of land that is to be sold in the ordinary conduct of business. The purchase price of the property of P50 million was paid in cash and a total transaction costs of P500,000 related to the acquisition of the property was also paid at a later date. The land was subdivided into 2,000 lots (200 square meter for every lot) for an additional cost of P5,500,000. On December 31, 2018, the market value of the lot was P1,500 per square meter.

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: On 28 April 20X2, Peele Realty purchased land and building for $5.25 million and $3.39 million,…

A: Here are the journal entries for Peele Realty :1. Revaluation of Land:- 20X2: Increase in land value…

Q: What is the accounting term for this type of acquisition?

A: Answer: When a company purchases a building and land together for a lump sum amount, the purchase…

Q: a. Compute the amount of Aqua's recognized gain on the sale of the realty.

A: Capital gain refers to the profit that is earned when an asset, such as a stock, bond, real estate,…

Q: Brackett Corporation had the following transactions in its land account: • January 1, 2017 -…

A: As per the historical cost principle, all assets in the organisation should be recorded at their…

Q: Industrial Metals purchases land, building, and equipment together for $1.2 million. The estimated…

A: Land, building and equipment are fixed assets of a business. These assets are recorded under…

Q: EB Corporation, a C corporation, purchases a warehouse on August 1, 2007, for $ 1 MILLION Straight…

A: Long-term capital gains are those resulting from holding an asset for longer than a year before…

Q: Allocate the lump-sum purchase price to the separate assets purchased.

A: Sometimes a business entity acquires a bunch of assets in exchange for a lump-sum payment.In such…

Q: For the year ended December 31, 2018, Carla Vista Ltd. had the following transactions related to the…

A: Journal Entry is the primary step in recording the transactions in the books of accounts.The…

Q: Timberly Construction makes a lump-sum purchase of several assets on January 1 at a total cash price…

A: In straight line depreciation method, equal depreciation chareged over the life of…

Q: On August 1, 2017, Riverbed Corporation acquired Marin, Inc. for a cash payment of $2.30 million. At…

A: Goodwill is an excess amount of purchase consideration over the net value of assets. It is based on…

Q: Yellow Corporation,

A: Examples of section 1231 properties include buildings, machinery, land, timber, and other…

Q: Sheridan Corporation owns and manages a small 10-store shopping centre, which it classifies as an…

A: Sheridan Corporation's management of its small 10-store shopping center as an investment property…

Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

On January 2, 2018, Randy Corporation acquired a track of land that is to be sold in the ordinary
conduct of business. The purchase price of the property of P50 million was paid in cash and a total
transaction costs of P500,000 related to the acquisition of the property was also paid at a later date.
The land was subdivided into 2,000 lots (200 square meter for every lot) for an additional cost of
P5,500,000. On December 31, 2018, the market value of the lot was P1,500 per square meter.
As of December 31, 2018, only 20,000 square meters are still unsold and market value of the lot had
increased to P1,600 square meter. On this date, Randy Corporation decided to transfer the
remaining lots into investment property that is to be carried under the fair value model. There was
no additional cost incurred on the change of intention on the property. What amount of gain should
Randy Corporation recognize as a result of the transfer?

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

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

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

On 13 February 20X5, Reekwa Company purchased an office tower for $31.1 million. The office is a mixed-use property: it is owner- occupied and includes rental units. The fair value of the building on 31 December 20X6 is $31.5 million and $28.0 million on 31 December 20X8. At the time of purchase, the office tower has a remaining useful life of 25 years, and is amortized on a straight-line basis. Required: 1. Should the office tower be considered property, plant, and equipment or investment property? Property, plant, and equipment Investment property 2. Assume the property is determined to be PPE, and management applies the elimination method for the revaluation model. Prepare the required journal entries for the revaluation of the office tower in 20X6 and 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No 1 Date 31 December 20X6 No journal entry required 2 31 December 20X8 Accounts payable General Journal Debit × ×…
On June 4, 2023, Tricon Corporation, a calendar - year corporation, purchased and began operating the Bandst Restaurant. Of the total purchase price to acquire the Bandst Restaurant, $46,744 is allocated to goodwill. How much, if any, of the $46,744 purchase price of the business that was allocated to goodwill will be deductible by Tricon Corporation in 2023?
Timberly Construction makes a lump - sum purchase of several assets on January 1 at a total cash price of $810,000. The estimated market values of the purchased assets are building, $ 487,600; land, $285,200; land improvements, $73,600; and four vehicles, $73,600. Allocate the lump - sum purchase price to the separate assets purchased. Prepare the journal entry to record the purchase. Compute the first-year depreciation expense on the building using the straight-line method, assuming a 15-year life and a $31, 000 salvage value. Compute the first-year depreciation expense on the land improvements assuming a five-year life and double - declining - balance depreciation.
Samtech Manufacturing purchased land and a building for $4 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building: Title insurance Legal fees for drawing the contract Pro-rated property taxes for the period after acquisition State transfer fees An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3.2 and $1.8 million, respectively. Shortly after acquisition, Samtech spent $92,000 to construct a parking lot and $50,000 for landscaping. Required: 1. Determine the initial valuation of each asset Samtech acquired in these transactions. 2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $350,000 and the salvaged materials were sold for $6,000. In addition, Samtech spent $89,000 clearing and grading the land in preparation for the construction of a new…