CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Problem 10-2 Your answer is par

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CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Problem 10-2 Your answer is partially correct. Try again. Selected accounts included in the property, plant, and equipment section of Larkspur Corporation's balance sheet at Land Land improvements Buildings Equipment $348,000 162,400 1,276,000 1,113,600 During 2017, the following transactions occurred. 1. A tract of land was acquired for $174,000 as a potential future building site. 2. A plant facility consisting of land and building was acquired from Mendota Company in exchange for 23,200 shares of Larkspur's common stock. On the acquisition date, Larkspur'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 $127,600 for land and $371,200 for the building at the exchange date. Current appraised values for the land and building, respectively, are $266,800 and $800,400. 3. Items of machinery and equipment were purchased at a total cost of $464,000. Additional costs were incurred as follows. Freight and unloading Sales taxes Installation $15,080 23,200 30,160 4. Expenditures totaling $110,200 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 $92,800 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 S23,200 on July 1, 2017. Original cost of the machine was SL04) o an ay 1,2014 and as e re aed i he tr ight-in ss ver estimated useful life of 7 years and a salvage value of $2,320 Version 4.24 Policy All Rights Reserved. A Division of 047 AM

Explanation / Answer

Working:

Acquisition cost of land and building from Mendota Company = 23200 shares x $37 = $858400

Total fair value of Land and Building = $266800 + $800400 = $1067200

Allocation to Land = $858400 x $266800/$1067200 = $214600

Allocation to Building = $858400 x $800400/$1067200 = $643800

Land = $348000 + $174000 + $214600 = $736600

Land improvements = $162400 + $110200 = $272600

Buildings = $1276000 + $643800 = $1919800

Equipment = $1113600 + $464000 + $15080 + $23200 + $30160 - $92800 - $51040 = $1502200

Balance at December 31, 2017 Land $ 736,600 Land improvements $ 272,600 Buildings $1,919,800 Equipment $1,502,200

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