Question

At December 31, 2013, certain accounts included in the property, plant, and equipment section of Reagan Company’s balance sheet had the following balances. Land $235,620 Buildings 891,820 Leasehold improvements 660,250 Equipment 883,570 During 2014, the following transactions occurred. 1. Land site number 621 was acquired for $859,050. In addition, to acquire the land Reagan paid a $51,100 commission to a real estate agent. Costs of $36,100 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $18,060. 2. A second tract of land (site number 622) with a building was acquired for $421,060. The closing statement indicated that the land value was $309,890 and the building value was $111,170. Shortly after acquisition, the building was demolished at a cost of $50,280. A new building was constructed for $333,430 plus the following costs. Excavation fees $39,910 Architectural design fees 19,890 Building permit fee 3,310 Imputed interest on funds used during construction (stock financing) 9,290 The building was completed and occupied on September 30, 2014. 3. A third tract of land (site number 623) was acquired for $653,260 and was put on the market for resale. 4. During December 2014, costs of $91,200 were incurred to improve leased office space. The related lease will terminate on December 31, 2016, 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 $85,410, freight costs were $3,860, installation costs were $2,660, and royalty payments for 2014 were $17,810. (a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2014. Disregard the related accumulated depreciation accounts.

Answer 1