Reference no: EM132885421

Problem - Classification of Costs Associated with Assets - The following account balances were included in Bromley Company's balance sheet on December 31, 2018:

Land $100,000

Land improvements 20,000

Buildings 300,000

Machinery and equipment 500,000

During 2019, the following transactions occurred:

1. Land was acquired for $70,000 for a future building site. Commissions of $4,000 were paid to a real estate agent.

2. A factory and land were acquired from Kent Development Company by issuing 20,000 shares of $3 par common stock. At that time, the stock was selling for $10 per share on the New York Stock Exchange. The independently appraised values of the land and the factory were $60,000 and $180,000, respectively.

3. Equipment was acquired at a cost of $120,000. In addition, sales tax, freight costs, and installation costs were $7,000, $10,000, and $16,000, respectively. During installation, the equipment was damaged, and $2,000 was spent for repairs.

4. A new parking lot was installed at a cost of $30,000.

5. Half the land purchased in Item 1 was prepared as a building site. Costs of $26,000 were incurred to clear the land, and the timber recovered was sold for $3,000. A new building was built for $60,000. Architect's fees relating to construction were $18,000, and imputed interest on equity funds used during construction was $15,000. No debt is outstanding.

6. Costs of $20,000 were incurred to improve some leased office space. The lease will terminate in 2021 and is not expected to be renewed.

7. A group of new machines was purchased under a royalty agreement that provides for payment of annual royalties based on units produced. The invoice price of the machines was $30,000, freight costs were $2,000, and royalty payments for 2019 were $12,000.

Required - Prepare journal entries to record all the preceding events. Unless otherwise indicated, assume the company makes all payments in cash.