Provide correct answer general accounting On March 1, 2010, Edington Company acquired real estate, on which it planned toconstruct a small office building, by paying $96,328 in cash. An old warehouse on theproperty was demolished at a cost of $8,227; the salvaged materials were sold for$1,706. Additional expenditures before construction began included $1,218attorney's fee for work concerning the land purchase, $4,310 real estate broker's fee,$9,690 architect's fee, and $13,536 to put in driveways and a parking lot.Determine the amount to be reported as the cost of the land.

Step 1: Define Capital ExpenditureA capital expenditure involves the purchase of fixed assets and is…

Answered: On March 1, 2010, Edington Company…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.8MCP

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Tuttle Construction Co. specializes in building replicas of historic houses. Tim Newman, president of Tuttle Construction, is considering the purchase of various items of equipment on July 1, 2014, for 400,000. The equipment would have a useful life of five years and no residual value. In the past, all equipment has been leased. For tax purposes, Tim is considering depreciating the equipment by the straight-line method. He discussed the matter with his CPA and learned that, although the straight-line method could be elected, it was to his advantage to use the Modified Accelerated Cost Recovery System (MACRS) for tax purposes. He asked for your advice as to which method to use for tax purposes. 1. Compute depreciation for each of the years (2014, 2015, 2016, 2017, 2018, and 2019) of useful life by (a) the straight-line method and (b) MACRS. In using the straight-line method, one-half years depreciation should be computed for 2014 and 2019. Use the MACRS rates presented in Exhibit 9. 2. Assuming that income before depreciation and income tax is estimated to be 750,000 uniformly per year and that the income tax rate is 40%, compute the net income for each of the years 2014, 2015, 2016, 2017, 2018, and 2019 if (a) the straight-line method is used and (b) MACRS is used. 3. What factors would you present for Tims consideration in the selection of a depreciation method?
On March 1, 2017, Sunland Company acquired real estate, on which it planned to construct a small office building, by paying $84,000 in cash. An old warehouse on the property was demolished at a cost of $9,000; the salvaged materials were sold for $1,860. Additional expenditures before construction began included $1,360 attorney's fee for work concerning the land purchase, $4,900 real estate broker's fee, $8,860 architect's fee, and $14,800 to put in driveways and a parking lot. (a) Determine the amount to be reported as the cost of the land. Cost of land
On March 1, 2017, Geoffrey Company acquired real estate, on which it planned to construct a small office building, by paying $85,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were so for $2,200. Additional expenditures before construction began included $1,500 attorney's fee for work concerning the land purchase, $5,500 real estate broker's fee, $9,100 architect's fee, and $16,000 to put in driveways and a parking lot. Instructions (a) Determine the amount to be reported as the cost of the land. (b) For each cost not used in part (a), indicate the account to be increased
Cominsky Company purchased a machine on July 1, 2018, for $28,000. Cominsky paid $200 in title fees and county property tax of $125 on the machine. In addition, Cominsky paid $500 shipping charges for delivery, and $475 was paid to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of6 years with a salvage value of $3,000. Determine the depreciation base of Cominsky’s new machine. Cominsky uses straightline depreciation.
On March 1, 2016, Beldon Corporation purchased land as a factory site for $60,000. An old building on the prop- erty was demolished, and construction began on a new building that was completed on December 15, 2016. Costs incurred during this period are listed below: $ 4,000 Demolition of old building Architect's fees (for new building) Legal fees for title investigation of land Property taxes on land (for period beginning March 1, 2016) 12,000 2,000 3,000 500,000 5,000 Construction costs Interest on construction loan Salvaged materials resulting from the demolition of the old building were sold for $2,000. Required: Determine the amounts that Beldon should capitalize as the cost of the land and the new building.
On February 1, 2010, Morgan Company purchased a parcel of land as a factory site for $200,000. An old building on the property was demolished, and construction began on a new building which was completed on November 1, 2010. Costs incurred during this period are listed below: $20,000 - Demolition of old building $35,000 - Architect's fees $5,000 - Legal fees for title investigation and purchase contract. $1,090,000 - Construction costs Salvaged materials resulting from demolition were sold for $10,000. Morgan should record the cost of the land and new building, respectively, as: $225,000 and $1,115,000 $210,000 and $1,130,000 $210,000 and $1,125,000 $215.000 and $1.125.000
On July 1, 2016, Drenz Inc. purchased land and incurred other costs relative to the construction of a new warehouse. A summary of economic activities is listed below: Purchase price 925,000 Title Insurance 7,500 Legal fees to purchase land 5,000 Cost of razing old building on lot 42,500 Proceeds from sale of salvageable materials (6,000) Property taxes, January 1, 2016 - June 30, 2016 15,000 Cost of grading and filling building site 45,000 Cost of building construction 3,100,000 Interest on construction loan 60,000 Cost of constructing driveway 400,000 Cost of parking lot and fencing 60,000 Compute for the cost of the land?
On January 1, 2018, Absolutely Bar & Grill purchased a building, paying $57,000 cash and signing a $100,000 note payable. The company paid another $66,000 to remodel the building. Furniture and fixtures cost $56,000, and dishes and supplies—a current asset—were obtained for $8,600. All expenditures were for cash. Assume that all of these expenditures occurred on January 1, 2018. Absolutely is depreciating the building over 25 years using the straight-line method, with estimated residual value of $54,000. The furniture and fixtures will be replaced at the end of five years and are being depreciated using thedouble-declining-balance method, with a residual value of zero. At the end of the first year, the company still had dishes and supplies worth $1,900. Show what the company will report for supplies, plant assets, and cash flows at the end of the first year on its income statement, balance sheet, and statement of cash flows. Begin with the income statement.…
Vaughn Company purchased a machine on July 1, 2021, for $32,200. Vaughn paid $230 in title fees and county property tax of $144 on the machine. In addition, Vaughn paid $575 shipping charges for delivery, and $546 was paid to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 6 years with a salvage value of $3,450.Determine the depreciation base of Vaughn’s new machine. Vaughn uses straight-line depreciation. Depreciation base
Nash's Trading Post, LLC purchased land adjacent to its plant to improve access for trucks making deliveries. Expenditures incurred in purchasing the land were as follows: purchase price, $55,000; broker’s fees, $6,000; title search and other fees, $5,000; demolition of an old building on the property, $5,700; grading, $1,200; digging foundation for the road, $3,000; laying and paving driveway, $25,000; lighting $7,500; signs, $1,500.List the items and amounts that should be included in the Land account. select an expenditure Digging Foundation for the RoadLand Acquisition CostTitle Search and Other FeesGradingLaying and Paving DrivewayDemolition of Old BuildingPurchase PriceLightingSignsBroker’s Fees $enter a dollar amount select an expenditure Purchase PriceLightingDemolition of Old BuildingTitle Search and Other FeesBroker’s FeesSignsLaying and Paving…
On July 1, 2017, Sandhill Company received $1,012,000 cash as compensation for the forced sale (condemnation) of the company’s land and building. The state planned to use the property to build a new on-ramp for a nearby highway. The land and building cost $460,000 and $782,000, respectively, when they were acquired. At July 1, 2017, the accumulated depreciation relating to the building amounted to $345,000. On December 1, 2017, Sandhill purchased a piece of replacement property for cash. The new land cost $331,200, and the new building cost $984,400.Prepare the journal entries to record the transactions on July 1 and December 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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