Acct 305 week 1 homework

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Week 1 Homework Solutions

 

Exercises E10-1, E10-8 & E10-14, and E10-18

 

Exercise 10-1

 

E 10–1: Acquisition costs; land and building

 

LO10–1

 

On March 1, 2013, Beldon Corporation purchased land as a factory site for $60,000. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2013. Costs incurred during this period are listed below:

 

 

Salvaged materials resulting from the demolition of the old building were sold for $2,000.

 

Required:

 

Determine the amounts that Beldon should capitalize as the cost of the land and the new building.

 

 

 

Exercise 10-8

 

 

 

E 10–8: Lump-sum acquisition

 

LO10–2

 

Pinewood Company purchased two buildings on four acres of land. The lump-sum purchase price was $900,000. According to independent appraisals, the fair values were $450,000 (building A) and $250,000 (building B) for the buildings and $300,000 for the land.

 

Required:

 

Determine the initial valuation of the buildings and the land.

 

Exercise 10–14

 

E 10–14: Disposal of property, plant, and equipment

 

LO10–6

 

Funseth Farms Inc. purchased a tractor in 2010 at a cost of $30,000. The tractor was sold for $3,000 in 2013. Depreciation recorded through the disposal date totaled $26,000.

 

Required:

 

  • 1. Prepare the journal entry to record the sale.
  • 2. Assuming that the tractor was sold for $10,000, prepare the journal entry to record the sale.

 

Exercise 10–18

 

E 10–17: Nonmonetary exchange

 

LO10–6

 

The Bronco Corporation exchanged land for equipment. The land had a book value of $120,000 and a fair value of $150,000. Bronco paid the owner of the equipment $10,000 to complete the exchange which has commercial substance.

 

E 10–18: Nonmonetary exchange

 

LO10–6

 

[This is a variation of the previous exercise.]

 

Required:

 

Assume the same facts as in Exercise 10–17 except that Bronco received $10,000 from the owner of the equipment to complete the exchange.

 

  • 1. What is the fair value of the equipment?
  • 2. Prepare the journal entry to record the exchange.