Question

Problem 10-2

Selected accounts included in the property, plant, and equipment section of Flounder Corporation’s balance sheet at December 31, 2016, had the following balances.

Land		$330,000
Land improvements		154,000
Buildings		1,210,000
Equipment		1,056,000

During 2017, the following transactions occurred.

1.		A tract of land was acquired for $165,000 as a potential future building site.
2.		A plant facility consisting of land and building was acquired from Mendota Company in exchange for 22,000 shares of Flounder’s common stock. On the acquisition date, Flounder’s stock had a closing market price of $37 per share on a national stock exchange. The plant facility was carried on Mendota’s books at $121,000 for land and $352,000 for the building at the exchange date. Current appraised values for the land and building, respectively, are $253,000 and $759,000.
3.		Items of machinery and equipment were purchased at a total cost of $440,000. Additional costs were incurred as follows.

Freight and unloading		$14,300
Sales taxes		22,000
Installation		28,600

4.		Expenditures totaling $104,500 were made for new parking lots, streets, and sidewalks at the corporation’s various plant locations. These expenditures had an estimated useful life of 15 years.
5.		A machine costing $88,000 on January 1, 2009, was scrapped on June 30, 2017. Double-declining-balance depreciation has been recorded on the basis of a 10-year life.
6.		A machine was sold for $22,000 on July 1, 2017. Original cost of the machine was $48,400 on January 1, 2014, and it was depreciated on the straight-line basis over an estimated useful life of 7 years and a salvage value of $2,200.

(a) Calculate the balance at December 31, 2017 in each of the following balance sheet accounts. (Hint: Disregard the related accumulated depreciation accounts.)

	Balance at December 31, 2017
Land	$
Land Improvements	$
Buildings	$
Equipment	$

Answer 1

(a) Calculate the balance at December 31, 2017 in each of the following balance sheet accounts. (Hint: Disregard the related accumulated depreciation accounts.)
	Balance at December 31, 2017
Land	$533,500.00
Land Improvements	$258,500.00
Buildings	$1,820,500.00
Equipment	$984,500.00
a)
FLOUNDER COMPANY
ANALYSIS OF LAND ACCOUNT
Balance at January 1, 2017	$330,000.00
Plant facility acquired from Mendota Company- portion of fair value allocated to land (Schedule 1)	$203,500.00
Balance at December 31, 2017	$533,500.00
Schedule 1
Computation of Fair Value of Plant Facility Acquired from Ken Mendota Company and Allocation to Land and Building
22,000 shares of Webb common stock at $37 quoted market price on date of exchange (22,000 X $37)	$814,000.00
Allocation to land and building accounts in proportion to appraised values at the exchange date:
	Market Value	Percentage of total
Land	$253,000.00	25.00%
Building	$759,000.00	75.00%
Total	$1,012,000.00	100.00%
Land = $814,000 x 25%	$203,500.00
Building = $814,000 x 75%	$610,500.00
Total	$814,000.00
b)
FLOUNDER COMPANY
ANALYSIS OF LAND IMPROVEMENTS ACCOUNT
Balance at January 1, 2017	$154,000.00
Parking lots, streets, and sidewalks	$104,500.00
Balance at December 31, 2017	$258,500.00
c)
FLOUNDER COMPANY
ANALYSIS OF BUILDINGS ACCOUNT
Balance at January 1, 2017	$1,210,000.00
Plant facility acquired from Mendota Company- portion of fair value allocated to Building (Schedule 1)	$610,500.00
Balance at December 31, 2017	$1,820,500.00
d)
FLOUNDER COMPANY
ANALYSIS OF MACHINERY AND EQUIPMENT ACCOUNT
Balance at January 1, 2017		$1,056,000.00
Cost of new machinery and equipment acquired
Invoice price
Freight and unloading costs	$14,300.00
Sales taxes	$22,000.00
Installation costs	$28,600.00	$64,900.00
		$1,120,900.00
Deduct cost of machines disposed of
Machine scrapped June 30, 2017	$88,000.00
Machine sold July 1, 2017	$48,400.00	-$136,400.00
Balance at December 31, 2017		$984,500.00