Question

At December 31, 2016, certain accounts included in the property, plant, and equipment section of Vaughn Company’s balance sheet had the following balances.

Land		$230,600
Buildings		897,600
Leasehold improvements		667,200
Equipment		882,700

During 2017, the following transactions occurred.

		1. Land site number 621 was acquired for $856,100. In addition, to acquire the land Vaughn paid a $51,800 commission to a real estate agent. Costs of $41,500 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $15,400.
		2. A second tract of land (site number 622) with a building was acquired for $422,400. The closing statement indicated that the land value was $302,100 and the building value was $120,300. Shortly after acquisition, the building was demolished at a cost of $40,900. A new building was constructed for $328,200 plus the following costs. Excavation fees $37,600 Architectural design fees 10,900 Building permit fee 2,500 Imputed interest on funds used during construction (stock financing) 8,400 he building was completed and occupied on September 30, 2017. 3. A third tract of land (site number 623) was acquired for $645,800 and was put on the market for resale. 4. During December 2017, costs of $89,800 were incurred to improve leased office space. The related lease will terminate on December 31, 2019, and is not expected to be renewed. (Hint: Leasehold improvements should be handled in the same manner as land improvements. 5. A group of new machines was purchased under a royalty agreement that provides for payment of royalties based on units of production for the machines. The invoice price of the machines was $87,300, freight costs were $3,200, installation costs were $2,500, and royalty payments for 2017 were $17,300. (a) Calculate the balance at December 31, 2017 in each of the following balance sheet accounts. Disregard the related accumulated depreciation accounts. Land= ? Buildings= ? Leasehold improvements= ? Equipment= ?

Answer 1

Land
Opening balance	2,30,600		Site 621
			Purchase price	8,56,100
Purchases:			Commission	41,500
Site 621	9,34,000		Clearing	51,800
Site 622	5,00,900		Recovery	-15,400
			Net total cost	9,34,000
Balance	16,65,500
			Site 622	Land	Building
			Purchase price	4,22,400
			Demolition	40,900
			Excavation fee	37,600
			Design		10,900
			Premit		2,500
			Interest		8,400
			Construction		3,28,200
			Cost	5,00,900	3,50,000

Building
Opening balance	8,97,600
Purchases:
Site 622	3,50,000
Balance	12,47,600
Leasehold improvements
Opening balance	6,67,200
Purchases:
Improvements	89,800
Balance	7,57,000
Equipment
Opening balance	8,82,700
Purchases	93,000
Balance	9,75,700

Since site 623 is purchased for resale, it is considered inventory rather a fixed asset and hence excluded from Property plant and equipment