At December 31, 2011, certain accounts included in the property, plant, and equipment section of Reagan Company s balance sheet had the following balances. Land $238,340 Buildings 909,260 Lease
At December 31, 2011, certain accounts included in the property, plant, and equipment section of Reagan Company’s balance sheet had the following balances.
Leasehold improvements 661,230
During 2012, the following transactions occurred.
1. Land site number 621 was acquired for $851,790. In addition, to acquire the land Reagan paid a $53,350 commission to a real estate agent. Costs of $39,750 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $18,390.
2. A second tract of land (site number 622) with a building was acquired for $423,450. The closing statement indicated that the land value was $306,130 and the building value was $117,320. Shortly after acquisition, the building was demolished at a cost of $43,670. A new building was constructed for $337,920 plus the following costs.
Excavation fees $41,800
Architectural design fees 14,900
Building permit fee 3,060
Imputed interest on funds used during construction (stock financing) 8,960
The building was completed and occupied on September 30, 2012.
3. A third tract of land (site number 623) was acquired for $652,700 and was put on the market for resale.
4. During December 2012, costs of $95,380 were incurred to improve leased office space. The related lease will terminate on December 31, 2014, and is not expected to be renewed. (Hint: Leasehold improvements should be handled in the same manner as land improvements.)
5. 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 $85,090, freight costs were $3,630, installation costs were $3,030, and royalty payments for 2012 were $18,140.
Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2012. Disregard the related accumulated depreciation accounts.
Balance at December 31, 2012