Question

In: Accounting

4. February 1, 2018, Salisbury Company purchased land for the future factory location at a cost...

4. February 1, 2018, Salisbury Company purchased land for the future factory location at a cost of $102,000. The dilapidated building that was on the property was demolished so that construction could begin on the new factory building. The new factory was completed on November 1, 2018. Costs incurred during this period were:

Item	Amount
Demolition dilapidated building	$2,200
Architect Fees	$11,250
Legal Fees - for title search	$1,850
Interest During Active Construction Period	$5,025
Real estate transfer tax	$1,350
Construction Costs	$605,000

Using this information, how much should be recorded as the cost of the land?

5. On January 1, 2017, Frostburg Company purchased for $68,500, equipment having a service life of six years and an estimated residual value of $4,000. Frostburg has recorded depreciation of the equipment using the straight-line method. On December 31, 2019, before making any annual adjusting entries, the equipment was exchanged for new machinery having a fair value of $35,000. The transaction has commercial substance. Use this information to prepare all General Journal entries (without explanation) required to record the events for December 31, 2019.

Expert Solution

Amount in $

Solution to Problem 4:

Land cost = 102000

Demolition dilapidated building = 2200

Legal fees - title search = 1850

Real estate transfer tax = 1350

Total = 107400

Cost of land which should be recorded is $107400

-----------------------------------------------------------------------------------------------------------------------------------------------

Amount in $

Solution to Problem 5:

Purchase price of equipment = 68500

Estimated residual value = 4000

Depreciable cost of equipment = 68500-4000 = 64500

Service life = 6 years

Annual depreciation on equipment = 64500/6 = 10750

Equipment value as on January 01, 2019: 47000

Year 2017 = 68500 - 10750 = 57750

Year 2018 = 57750 - 10750 = 47000

Equipment value as on December 31, 2019 = 47000 - 10750 = 36250

Accumulated Depreciation from 2017 to 2019 = 10750*3 = 32250

December 31, 2019	Depreciation on Equipment - Expense	10750
	Accumulated Depreciation		10750

December 31, 2019	New Machinery - Asset	35000
	Accumulated Depreciation	32250
	Loss on exchange of equipment	1250
	Equipment		68500

ekkarill92 answered 3 months ago

2. On February 1, 2018, Sun Devil Company purchased land for a warehouse & distribution center...

2. On February 1, 2018, Sun Devil Company purchased land for a warehouse & distribution center for $540,000. To help finance the land and construction of the distribution center, $1,725,000 was borrowed on February 1, 2018 on a 9%, 3-year note payable, with interest payable annually every February 1st. Sun Devil began construction on the facility on March 1st. The following expenditures were incurred for construction: March 1 $ 360,000 May 1 $ 504,000 June 1 $ 900,000 August 1...

Pronghorn Mining Company purchased land on February 1, 2020, at a cost of $996,100. It estimated...

Pronghorn Mining Company purchased land on February 1, 2020, at a cost of $996,100. It estimated that a total of 51,900 tons of mineral was available for mining. After it has removed all the natural resources, the company will be required to restore the property to its previous state because of strict environmental protection laws. It estimates the fair value of this restoration obligation at $93,600. It believes it will be able to sell the property afterwards for $104,000. It...

On March 1, 2018, Beldon Corporation purchased land as a factory site for $72,000. An old...

On March 1, 2018, Beldon Corporation purchased land as a factory site for $72,000. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2018. Costs incurred during this period are listed below: Demolition of old building $ 5,000 Architect’s fees (for new building) 11,000 Legal fees for title investigation of land 8,000 Property taxes on land (for period beginning March 1, 2018) 4,200 Construction costs 620,000 Interest on...

On January 1, 2018, Fulton Corporation purchased land as a factory site for $80,000. Fulton paid...

On January 1, 2018, Fulton Corporation purchased land as a factory site for $80,000. Fulton paid $30,000 and signed a noninterest-bearing note requiring the company to pay the remaining $50,000 on January 1, 2021. An interest rate of 5% properly reflects the time value of money for this type of loan agreement. An old building on the property was demolished, and construction began on a new building that was completed on December 31, 2018. Costs incurred during this period are...

(a) ABC Company purchased land at a cost of $400,000,000 during 2018. ABC chooses to use...

(a) ABC Company purchased land at a cost of $400,000,000 during 2018. ABC chooses to use the revaluation method of accounting for land. The fair value of the land is as follows at December 31, 2018 2019 and 2020: 2018 - $450,000,000 2019 - $360,000,000 2020 - $385,000,000 Required (a) Record the journal entries to account for revaluation of the land at 31 December 2018, 2019 and 2020. (b) Assume ABC Company chooses to apply the cost method for the...

In February 2018, Gemstone Industries purchased the Opal Mine at a cost of $20,000,000. The mine...

In February 2018, Gemstone Industries purchased the Opal Mine at a cost of $20,000,000. The mine is estimated to contain 500,000 carats of stone and to have a residual value of $1,000,000 after mining operations are completed. During 2018, 50,000 carats of stone were removed from the mine and sold. In this situation: A. The book value of the mine is $19,000,000 at the end of 2018. B. The amount of depletion deducted from revenue during 2018 is $1,900,000. C....

George Company purchased land for use as its corporate headquarters. A small factory that was on...

George Company purchased land for use as its corporate headquarters. A small factory that was on the land when it was purchased was torn down, and before the new building’s foundation could be constructed, a substantial amount of rock had to be blasted and removed. Because the office building is set back on the land far from the public road, George had the contractor construct a paved road from the public road to the parking lot of the office building....

On 1 July 2018 Alto Ltd purchased land for $4 000 000, in cash. Alto Ltd...

On 1 July 2018 Alto Ltd purchased land for $4 000 000, in cash. Alto Ltd uses the cost model to account for land. On 1 July 2018 Alto Ltd purchased equipment for $1 000 000, in cash. Alto Ltd uses the revaluation model to account for equipment and depreciates the asset over its estimated useful life of 5 years using the straight-line method. The disposal value at the end of 5 years was assessed as zero. The following information...

On February 15, 2018, Leo purchased and placed in service a new car that cost $54,600....

On February 15, 2018, Leo purchased and placed in service a new car that cost $54,600. The business use percentage for the car is always 100%. He does not take the additional first-year depreciation or any § 179. If required, round your answers to the nearest dollar. Click here to access the depreciation table of the textbook. Click here to access the limits for certain automobiles. a. What MACRS convention applies to the new car? Half-year b. Is the automobile...

On February 8, 2018, Holly purchased a residential apartment building. The cost basis assigned to the...

On February 8, 2018, Holly purchased a residential apartment building. The cost basis assigned to the building is $209,000. Holly also owns another residential apartment building that she purchased on December 15, 2018, with a cost basis of $588,000. Click here to access the depreciation tables. If required, round intermediate calculations and final answers to nearest dollar. a. Calculate Holly's total depreciation deduction for the apartments for 2018 using MACRS. $ b. Calculate Holly's total depreciation deduction for the apartments...