At December 31, 2013, certain accounts included in the property, plant, and equi

Question

At December 31, 2013, certain accounts included in the property, plant, and equipment section of Reagan Company’s balance sheet had the following balances.

Equipment

During 2014, the following transactions occurred.

875,820

The building was completed and occupied on September 30, 2014.

Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2014. Disregard the related accumulated depreciation accounts.

Land $234,900 Buildings 901,460 Leasehold improvements 664,570

Equipment

During 2014, the following transactions occurred.

1. Land site number 621 was acquired for $854,620. In addition, to acquire the land Reagan paid a $59,220 commission to a real estate agent. Costs of $35,430 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $17,580. 2. A second tract of land (site number 622) with a building was acquired for $428,960. The closing statement indicated that the land value was $309,050 and the building value was $119,910. Shortly after acquisition, the building was demolished at a cost of $41,330. A new building was constructed for $339,390 plus the following costs.

875,820

Explanation / Answer

Determine the balance sheet accounts for 2014:

Land:

Details

Amount

Land (Dec 31st - 2013)

$     234,900

Add: Purchase of land (621)

$     854,620

Add: Purchase of land (622)

$     309,050

Add: Purchase of land (623)

$     658,950

Add: Commission

$        59,220

Add: To clear the land exp

$       35,430

Less: Sold of timber

$        17,850

Land (Dec 31st - 2014)

$ 2,134,320

Buildings:

Details

Amount

Buildings (Dec 31st - 2013)

$     901,460

Add: Purchase of building

$     119,910

Less: Demolished cost

$        41,330

Add: Construction cost

$     339,390

Add: Excavation fees

$        46,970

Add: Architectural design fees

$        17,470

Add: Building permit fee

$          3,270

Add: Imputed interest on
funds used during construction

$          9,250

Buildings (Dec 31st - 2014)

$ 1,396,390

Leasehold improvements:

Details

Amount

Leasehold improvements (Dec 31st - 2013)

$ 664,570

Add: Improve the leased office space

$    91,710

Leasehold improvements (Dec 31st - 2014)

$ 756,280

Equipment:

Details

Amount

Equipment (Dec 31st - 2013)

$ 875,820

Add: Invoice price of machine

$    86,010

Add: Freight cost

$      4,040

Add: Installation cost

$      2,900

Equipment (Dec 31st - 2014)

$ 968,770

Details

Amount

Land (Dec 31st - 2013)

$     234,900

Add: Purchase of land (621)

$     854,620

Add: Purchase of land (622)

$     309,050

Add: Purchase of land (623)

$     658,950

Add: Commission

$        59,220

Add: To clear the land exp

$       35,430

Less: Sold of timber

$        17,850

Land (Dec 31st - 2014)

$ 2,134,320

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