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

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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 2 months ago

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