Reference no: EM133090927

Problem 1 - Pharoah Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2020.

Purchase

Cash paid for equipment, including sales tax of $6,300 $132,300

Freight and insurance cost while in transit 2,520

Cost of moving equipment into place at factory 3,906

Wage cost for technicians to test equipment 5,040

Insurance premium paid during first year of operation on this equipment 1,890

Special plumbing fixtures required for new equipment 10,080

Repair cost incurred in first year of operations related to this equipment 1,638

Construction

Material and purchased parts (gross cost $252,000; failed to take 2% cash discount) $252,000

Imputed interest on funds used during construction (stock financing) 17,640

Labor costs 239,400

Allocated overhead costs (fixed-$25,200; variable-$37,800) 63,000

Profit on self-construction 37,800

Cost of installing equipment 5,544

Compute the total cost to be capitalized for each of these two pieces of equipment.

Problem 2 - The following expenditures and receipts are related to land, land improvements, and buildings acquired for use in a business enterprise. The receipts are enclosed in parentheses.

(a) Money borrowed to pay building contractor (signed a note) $(292,700)

(b) Payment for construction from note proceeds 292,700

(c) Cost of land fill and clearing 10,240

(d) Delinquent real estate taxes on property assumed by purchaser 7,220

(e) Premium on 6-month insurance policy during construction 9,900

(f) Refund of 1-month insurance premium because construction completed early (1,650 )

(g) Architect's fee on building 25,360

(h) Cost of real estate purchased as a plant site (land $206,100 and building $55,700) 261,800

(i) Commission fee paid to real estate agency 8,720

(j) Installation of fences around property 4,310

(k) Cost of razing and removing building 12,100

(l) Proceeds from salvage of demolished building (5,100 )

(m) Interest paid during construction on money borrowed for construction 11,850

(n) Cost of parking lots and driveways 18,640

(o) Cost of trees and shrubbery planted (permanent in nature) 15,130

(p) Excavation costs for new building 2,940

Identify each item by letter and list the items in columnar form, using the headings shown below. All receipt amounts should be reported in parentheses. For any amounts entered in the Other Accounts column, also indicate the account title.

Problem 3 - Coronado Industries purchased equipment for $31600. Sales tax on the purchase was $1450. Other costs incurred were freight charges of $360, repairs of $600 for damage during installation, and installation costs of $410. What is the cost of the equipment?

Problem 4 - Sheffield Football Co. had a player contract with Watts that is recorded in its books at $8430000 on July 1, 2020. Ivanhoe Football Co. had a player contract with Kurtz that is recorded in its books at $11150000 on July 1, 2020. On this date, Sheffield traded Watts to Ivanhoe for Kurtz and paid a cash difference of $1115000. The fair value of the Kurtz contract was $12600000 on the exchange date. The exchange had no commercial substance. After the exchange, the Kurtz contract should be recorded in Sheffield's books at

Problem 5 - Blossom Company traded machinery with a book value of $600000 and a fair value of $950000. It received in exchange from Crane Company a machine with a fair value of $855000 and cash of $95000. Crane's machine has a book value of $902500. What amount of gain should Blossom recognize on the exchange (assuming lack of commercial substance)?