Question: At December 31, 2015, certain accounts included in the property, plant, and equipment section of Townsand Company's balance sheet had the following balances:
| Land |
|
$100,000 |
| Buildings |
|
800,000 |
| Leasehold improvements |
|
500,000 |
| Machinery and equipment |
|
700,000 |
During 2016, the following transactions occurred:
Land site number 621 was acquired for $1,000,000. Additionally, to acquire the land, Townsand paid a $60,000 commission to a real estate agent. Costs of $15,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $5,000.
A second tract of land (site number 622) with a building was acquired for $300,000. The closing statement indicated that the land value was $200,000 and the building value was $100,000. Shortly after acquisition, the building was demolished at a cost of $30,000. A new building was constructed for $150,000 plus the following costs:
| Excavation fees |
|
$11,000 |
| Architectural design fees |
|
8,000 |
| Building permit fee |
|
1,000 |
The building was completed and occupied on September 29, 2016.
A third tract of land (site number 623) was acquired for $600,000 and was put on the market for resale.
Extensive work was done to a building occupied by Townsand under a lease agreement that expires on December 31, 2025. The total cost of the work was $125,000, which consisted of the following:
| Painting of ceilings |
$ 10,000 |
(estimated useful life is 1 year) |
| Electrical work |
35,000 |
(estimated useful life is 10 years) |
| Construction of extension to current working area |
80,000 |
(estimated useful life is 30 years) |
|
$125,000 |
|
The lessor, Steinbeck Company, paid one-half of the costs incurred in connection with the extension to the current working area.
During December 2016, costs of $65,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2018, and is not expected to be renewed.
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 $75,000, freight costs were $2,000, unloading charges were $1,500, and royalty payments for 2016 were $13,000.
Required: Prepare a detailed analysis of the changes in the balance sheet accounts-Land, Buildings, Leasehold Improvements, and Machinery and Equipment-for 2016. Disregard the related accumulated depreciation accounts.
If a cost should not be allocated to one of the four balance sheet accounts listed, then select the "Other" column.
| Cost |
Account |
| Land # 621 purchase price |
|
| Commission to real estate agent |
|
| Clearing costs |
|
|
Amounts recovered for timber and gravel
|
|
| Land site #622 purchase price |
|
| Demolition cost |
|
| Construction costs |
|
|
Building permit fee
|
|
|
Architectural design fees
|
|
|
Excavation fees
|
|
| Land site #623 purchase price |
|
| Painting of ceilings |
|
|
Electrical work
|
|
|
Construction of extension
|
|
|
Office space work
|
|
| Machine purchase price |
|
|
Freight costs
|
|
|
Unloading charges
|
|
| Royalty payments |
|
Determine the new ending balance for each of the following accounts:
|
Beginning Balance |
|
Ending Balance |
| Land |
$100,000 |
|
$ |
| Buildings |
$800,000 |
|
$ |
| Leasehold Improvements |
$500,000 |
|
$ |
| Machinery and Equipment |
$700,000 |
|
$ |