Reference no: EM132885429
Problem - Comprehensive - At December 31, 2018, 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 2019, the following transactions occurred:
1. 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.
2. 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, 2019.
3. A third tract of land (site number 623) was acquired for $600,000 and was put on the market for resale.
4. Extensive work was done to a building occupied by Townsand under a lease agreement that expires on December 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 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 2019 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 2019. Disregard the related accumulated depreciation accounts