Question

2018, certain accounts included in the property, plant, and cu 10-4 Comprehensive At December 31, 2018, co LO 10.2 10.2 of Townsand Company's balance sheet had the following b of Towns LO 10.5 AICPA Land $100,000 Adapted Buildings 800,000 Leasehold improvements 500,000 hinery and equipment 700,000 During 2019, the following transactions occurred: 1. Land site number 621 was acquired for S1.000.000. Additionally S60,000 commission to a real estate agent. Co FUUUU. Additionally, to acquire the land. Townsand paid a on 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. 2. A second tract of land (site number 022) 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. building was demolished at a cost of $30,000. A new and the building value was $100,000. Shortly after acquisition, the shed at a cost of $30,000. A new building was constructed for $150,000 plus the follow- ing costs: Excavation fees $11,000 Architectural design fees 8,000 Building permit fee 1,000 The building was completed and occupied on September 29, 2019. 4. Extensive work was done to a building occupied site number 623) was acquired for $600,000 and was put on the market for resale. was done to a building occupied by Townsand under a lease agreement that expires on Decem ber 31, 2028. 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. 5. During December 2019, costs of $65,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2021, and is not expected to be renewed. 6. A group of new machines was purchased under a royalty agreement that provides for payment of royaltie based on units of production for the machines. The invoice price of the machines was $75,000, freight cost were $2,000, unloading charges were $1,500, and royalty payments for 2019 were $13,000.

Answer 1

1)
Townsand Company
Analysis of Land Account
For 2019
Balance at January 1, 2019			$   100,000.00
Land site number 621
Acquisition cost		$1,000,000.00
Commission to real estate agent		$     60,000.00
Clearing costs	$     15,000.00
Less: Amounts recovered	$       5,000.00	$     10,000.00
Total land site number 621			$1,070,000.00
Land site number 622
Land value		$   200,000.00
Building value		$   100,000.00
Demolition cost		$     30,000.00
Total land site number 622			$   330,000.00
Balance at December 31, 2019			$1,500,000.00
Townsand Company
Analysis of Buildings Account
For 2019
Balance at January 1, 2019			$   800,000.00
Cost of new building constructed on land site number 622
Construction costs		$   150,000.00
Excavation fees		$     11,000.00
Architectural design fees		$       8,000.00
Building permit fee		$       1,000.00	$   170,000.00
Balance at December 31, 2019			$   970,000.00
Townsand Company
Analysis of Leasehold Improvements Account
For 2019
Balance at January 1, 2019			$   500,000.00
Office space			$     65,000.00
Leasehold improvement on leased space			$   125,000.00
Balance at December 31, 2019			$   690,000.00
Townsand Company
Analysis of Machinery and Equipment Account
For 2019
Balance at January 1, 2019			$   700,000.00
Cost of the new machines acquired
Invoice price		$     75,000.00
Freight costs		$       2,000.00
Unloading costs		$       1,500.00	$     78,500.00
Balance at December 31, 2019			$   778,500.00
b)
Land site number 623, which was acquired for $600,000, should be included in Townsand’s statement of financial position as land held for resale (investment section).
Royalty payments of $13,000 should be included as a normal operating expense in Townsand’s income statement