Ted Khan owns Khan Development Inc. During 20X7, the following transactions took place:Transaction ATransaction BTransaction CKhan acquired a parcel of land for $11,400,000 (plus 2% in realestate commissions). On closing, Khan paid $45,400 in legal feesas well as $23,300 in back taxes owed on the property. The landwould be used to build new semi-detached and row townhouses.Immediately following the purchase, Khan submitted a proposal tothe municipality to rezone the property to residential use. Legalfees and other admin costs associated with the rezoning permitswere $59,000. Upon approval, Khan completed grading and added newdrainage that was required as part of the approval. The totalcost of this work was $173,000.Khan also acquired another nearby parcel of land, already zonedas residential for $1,680,000. The land had two houses that wereinhabitable in their current state. Khan planned to use this siteto build their sales office and showrooms for the sites above.The land had a fair value of $1,490,000 and the building value(s)were $190,000. Khan demolished the buildings for a total of$69,000. Khan incurred the following expenditures whenconstructing the showrooms:The building was completed and occupied on 30 September 20X5.Khan purchased a variety of new tools, that will be required aspart of the construction of the properties. This included 2bobcats/diggers that had a cost of $490,000, and some other toolsthat added up to $39,000 (inclusive of $2,200 of HST). Thediggers were shipped from the United States for a total cost of$3,800. Khan paid $4,500 in import duties on these as well inaddition to $29,000 in HST.Building (exterior and materials)Excavation feesBuilding permitsArchitectural design feesBorrowing costs during constructionDriveways/parking lotsLandscaping$833,00029,10019,40049,0009,40076,00042,000Required:Determine the amounts to be capitalized for each of the above transactions.LandBuildingsLand improvementsMachinery and EquipmentTools and Other$ 11,928,700

Capitalization of costs are considered as part of fixed assets instead of stating them as expenses…

Ted Khan owns Khan Development Inc. During 20X7, the following transactions took place: Transaction A Transaction B Khan acquired a parcel of land for $11,400,000 (plus 2% in real estate commissions). On closing, Khan paid $45,400 in legal fees as well as $23,300 in back taxes owed on the property. The land would be used to build new semi-detached and row townhouses. Immediately following the purchase, Khan submitted a proposal to the municipality to rezone the property to residential use. Legal fees and other admin costs associated with the rezoning permits were $59,000. Upon approval, Khan completed grading and added new drainage that was required as part of the approval. The total cost of this work was $173,000. Khan also acquired another nearby parcel of land, already zoned as residential for $1,680,000. The land had two houses that were inhabitable in their current state. Khan planned to use this site to build their sales office and showrooms for the sites above.

Ted Khan owns Khan Development Inc. During 20X7, the following transactions took place: Transaction A Transaction B Khan acquired a parcel of land for $11,400,000 (plus 2% in real estate commissions). On closing, Khan paid $45,400 in legal fees as well as $23,300 in back taxes owed on the property. The land would be used to build new semi-detached and row townhouses. Immediately following the purchase, Khan submitted a proposal to the municipality to rezone the property to residential use. Legal fees and other admin costs associated with the rezoning permits were $59,000. Upon approval, Khan completed grading and added new drainage that was required as part of the approval. The total cost of this work was $173,000. Khan also acquired another nearby parcel of land, already zoned as residential for $1,680,000. The land had two houses that were inhabitable in their current state. Khan planned to use this site to build their sales office and showrooms for the sites above.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Julia currently is considering the purchase of some land to be held as an investment. She and the seller have agreed on a contract under which Julia would pay $1,000 per month for 60 months, or $60,000 total. The seller, not in the real estate business, acquired the land several years ago by paying $10,000 in cash. Two alternative interpretations of this transaction are (1) a price of $51,726 with 6 percent interest and (2) a price of $39,380 with 18 percent interest. Which interpretation would you expect each party to prefer? Why?
Arlington LLC exchanged land used in its business for some new land. Arlington orginally purchased the land for $30,000. The new land had a fair market value of $36,000. Arlington also received $4,000 of office equipment in the transaction. What is Arlington's gain or loss recognized on the exchange?
During the current year, Finn and Claire, a married couple who use the cash method of accounting purchased a principal residence for $325,000. They paid $39,000 down and financed the remaining $286,000 of the purchase price with a 30-year mortgage. At the closing, they also paid $350 for an appraisal, $425 for a title search, and 2.5 points representing additional interest over the term of the loan. At the end of the year, Finn and Claire received a statement from the mortgage company indicating that $11,500 of their total monthly payments made during the year represents interest and $1,100 is a reduction of the principal What is the total amount Finn and Claire may deduct in the current year arising from the purchase and ownership of their home? Finn and Claire may deduct . Part 2 b. What is the treatment of the other items that are not deductible? A. The other closing costs are added to the market value of the home. B. The other closing…
On December 1, 20X0, AKE Pte Ltd paid $5,000 to a Real Estate consulting company for a market report of the property market. The market survey was favourable and AKE Pte Ltd decided to make an entry into the property market. On January 1, 20X1 the company purchased two buildings paying $800,000 for Building X and $1,200,000 for Building Y. The company paid $20,000 to the property agent and incurred an additional $80,000 legal fee to finalise the transaction. Both buildings have useful life of 40 years and zero residual value. The company uses straight- line method for depreciation of all its non-current assets. The company intends to use Building X as their office and rent out Building Y. The company adopts revaluation model for its PPE and fair value model for its investment property. Any accumulated depreciation at the date of the revaluation will be eliminated against the gross carrying amount of the asset. At the end of the year 20X1, values of the two buildings were as below:…
Eleven years ago, Lynn, Incorporated purchased a warehouse for $315,000. This year,the corporation sold the warehouse to Firm D for $80,000 cash and D’s assumption ofa $225,000 mortgage. Through date of sale, Lynn deducted $92,300 straight-linedepreciation on the warehouse.Required:b. What is the character of this gain?c. How would your answers change if Lynn was a noncorporate business?
Dorothy and John Hufffschneider listed their house and lot for sale with C. B. Property. The asking price was $165,000, and the owners told C. B. that the size of the property was 6.8 acres. Dean Olson, a salesman for C. B., advertised the property in local newspapers as consisting of six acres. James and Jean Holcomb signed a contract to purchase the property through Olson after first inspecting the property with Olson and being assured by Olson that the property was at least 6.6 acres. The Holcombs never asked for or received a copy of the survey. In actuality, the lot was only 4.6 acres. The Holcombs now seek to rescind the contract. Decision?
On May 31, 2022, Javier Sanchez purchased and placed in service a new 7-year class asset costing $470,000 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC). Rather than using bonus depreciation, Javier would like to use § 179 to expense $200,000 of this asset and then use regular MACRS to cost recover the remaining cost. During 2022, his business generated a net income of $564,000 before any § 179 immediate expense election. If required round your intermediate computations and final answers to the nearest dollar. Click here to access the depreciation table to use for this problem. a. Determine the cost recovery deductions (including first-year additional depreciation) that Javier Sanchez can claim with respect to this asset in 2022 and 2023. Total cost recovery deduction in 2022: Total cost recovery deduction in 2023: $
Cayden Purchased the following for his rental real estate business: An apartment building; he paid $103,500 for the building ( not including the value of the land). Furniture for $8,649. Pickup truck for $27,500, used for 75% business. What is Cayden's total unadjusted basis immediately after acquisition (UBIA) of these assets? 1) $29,274 2) $112,149 3) $132,774 4) $139,649
1
On January 20, 2022, Javier Sanchez purchased and placed in service a new 7-year class asset costing $419,600 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC). Rather than using bonus depreciation, Javier would like to use § 179 to expense $200,000 of this asset and then use regular MACRS to cost recover the remaining cost. During 2022, his business generated a net income of $503,520 before any § 179 immediate expense election. If required round your intermediate computations and final answers to the nearest dollar. Click here to access the depreciation table to use for this problem. a. Determine the cost recovery deductions (including first-year additional depreciation) that Javier Sanchez can claim with respect to this asset in 2022 and 2023. Total cost recovery deduction in 2022: $ 31,381 Total cost recovery deduction in 2023: $ 53,780 b. Complete Javier's Form 4562 (page 1) for 2022. Note: For 2022, the maximum § 179 is…
Malik Edson has the following assets: • Land with ACB of $60,000 Building with a cost of $105,000, and UCC of $79,000. Malik sells both of land and building in a single transaction for $219,000. The estimated FMV of each was: • Land: $146,000 • Building: $73,000 How much capital gain and terminal loss will Malik realize on this transaction? Choose the correct answer. A. capital gain of $73,000, terminal loss of $32,000 B. capital gain of $73,000, terminal loss of $6,000 C. capital gain of $54,000, terminal loss of $0 D. capital gain of $80,000, terminal loss of $0