Answered: Pharoah Co. purchased land as a factory…

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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I GOT THE FOLLOWING WRONG ON AN ASSIGNMENT. CAN I GET SOME HELP SHOWING ME HOW TO GET THE RIGHT ANSWERS FOR THESE PLEASE <3 THANKS IN ADVANCE

PART A)

Pharoah Co. purchased land as a factory site for $408,000. The process of tearing down two old buildings on the site and constructing the factory required 6 months.

The company paid $42,840 to raze the old buildings and sold salvaged lumber and brick for $6,426. Legal fees of $1,887 were paid for title investigation and drawing the purchase contract. Pharoah paid $2,244 to an engineering firm for a land survey, and $69,360 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $1,530, and a liability insurance premium paid during construction was $918. The contractor’s charge for construction was $2,794,800. The company paid the contractor in two installments: $1,224,000 at the end of 3 months and $1,570,800 upon completion. Interest costs of $173,400 were incurred to finance the construction.

Determine the cost of the land and the cost of the building as they should be recorded on the books of Pharoah Co. Assume that the land survey was for the building.

Cost of the Land		$enter a dollar amount
Cost of the Building		$enter a dollar amount

PART B.)

On August 1, Bonita, Inc. exchanged productive assets with Windsor, Inc. Bonita’s asset is referred to below as “Asset A,” and Windsor’ is referred to as “Asset B.” The following facts pertain to these assets.

	Asset A	Asset B
Original cost	$ 134,400	$ 154,000
Accumulated depreciation (to date of exchange)	56,000	65,800
Fair value at date of exchange	84,000	105,000
Cash paid by Bonita, Inc.	21,000
Cash received by Windsor, Inc.		21,000

Assuming that the exchange of Assets A and B has commercial substance, record the exchange for both Bonita, Inc. and Windsor, Inc. in accordance with generally accepted accounting principles. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)