Question

Problem 10-1

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

Land		$239,000
Buildings		901,400
Leasehold improvements		660,000
Equipment		882,000

During 2017, the following transactions occurred.

1.		Land site number 621 was acquired for $859,100. In addition, to acquire the land Monty paid a $51,100 commission to a real estate agent. Costs of $44,400 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $14,600.
2.		A second tract of land (site number 622) with a building was acquired for $416,400. The closing statement indicated that the land value was $297,200 and the building value was $119,200. Shortly after acquisition, the building was demolished at a cost of $40,700. A new building was constructed for $329,300 plus the following costs.

Excavation fees		$38,300
Architectural design fees		11,100
Building permit fee		2,500
Imputed interest on funds used during construction (stock financing)		8,500

The building was completed and occupied on September 30, 2017.

3.		A third tract of land (site number 623) was acquired for $656,300 and was put on the market for resale.
4.		During December 2017, costs of $88,300 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 $86,900, freight costs were $3,400, installation costs were $2,400, and royalty payments for 2017 were $17,400.

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

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

Answer 1

Solution:

a) Calculating the Balance at December 31, 2017 in Each of the Following Balance Sheet Accounts:

Analysis of Land:

Particulars	Amount	Amount
Balance at January 1, 2017		$239,000
Land Site 621:
Acquisition Cost	$859,100
Commission paid to real Estate	$51,100
Clearing of Land	$44,400
Less: Amount Recoverd	($14,600)
Total Cost of Land Site 621		$940,000
Land Site 622
Land Value	$297,200
Building Value	$119,200
Demolition Value	$40,700
Total Value of Land site 622		$457,100
Balance at December 31, 2017		$1,636,100

Analysis of Building:

Particulars	Amount	Amount
Balance at January 1, 2017		$901,400
Cost of New Building Constructed at Site 622:
Construction Cost	$329,300
Excavation fees	$38,300
Architectural design fees	$11,100
Building permit fee	$2,500
Total Cost Incurred		$381,200
Balance at December 31, 2017		$1,282,600

Analysis of Leasehold Improvements:

Particulars	Amount
Balance at January 1, 2017	$660,000
Office Space	$88,300
Balance at December 31, 2017	$748,300

Analysis of Equipment:

Particulars	Amount	Amount
Balance at January 1, 2017		$882,000
Cost of New Machine:
Invoice Price	$86,900
Freight	$3,400
Installation	$2,400
Total Costs		$92,700
Balance at December 31, 2017		$974,700

	Balance at December 31, 2017
Land	$1,636,100
Buildings	$1,282,600
Leasehold Improvements	$748,300
Equipment	$974,700