AC 302 CHAPTER 10 QUESTION AND PROBLEMS
Exercise 10 QUESTION 2
Name Date
Instructor Course
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
E10-2 (Acquisition Costs of Realty) Pollachek Co. purchased land as a factory site for
$450,000 . The process of tearing down two old buildings on the site and constructing the
factory required 6 months. The company paid $42,000 to raze the old buildings and
sold salvaged lumber and brick for $6,300 . Legal fees of $1,850
were paid for title investigation and drawing the purchase contract. Pollachek paid $2,200
to an engineering firm for a land survey, and $65,000 for drawing the factory plans. The land
survey had to be made before definitive plans could be drawn. Title insurance on the property cost
$1,500 , and a liability insurance premium paid during construction was $900
The contractor- charge for construction was $2,740,000 . The company paid the contractor in two
installments: $1,200,000 at the end of three months and $1,540,000 upon
completion. Interest costs of $170,000 were incurred to finance the construction.
Instructions:
Determine the cost of the land and the cost of the building as they should be recorded on the books of Pollachek Co. Assume that the land survey was for the building.
Land Building
Text Title Amount
Text Title Amount
Less: Salvage Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Formula Formula
Exercise 10-3
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
E10-3 (Acquisition Costs of Trucks) Shabbona Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2012. The terms of acquisition for each truck are described below.
1. Truck #1 has a list price of $15,000 and is acquired for a cash payment of $13,900
2. Truck #2 has a list price of $20,000 and is acquired for a down payment of $2,000
cash and a zero-interest bearing note with a face amount of $18,000 The note is due
April 1, 2013, Shabbona would normally have to pay interest at a rate of 10% for such a
borrowing, and the dealership has an incremental borrowing rate of 8%
3. Truck #3 has a list price of $16,000 It is acquired in exchange for a computer system that
Shabbona carries in inventory. The computer system costs $12,000 and normally sold by
Shabbona for $15,200 Shabbona uses perpetual inventory system.
4. Truck #4 has a list price of $14,000 It is acquired in exchange for 1,000
shares of common stock in Shabbona Corporation. The stock has a par value per share of
$10 and a market value of $13 per share.
Instructions:
Prepare the appropriate journal entries for the foregoing transactions for Shabbona Corporation.
1 Account Title Amount
Account Title Amount
2 Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
"Hint: Use the Excel Present Value formula.
Cells are formatted to show to 2 decimal places."
3 Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
4 Account title Amount
Account title Amount
Account title Amount
Note: Due to significant digits with worksheets, calculators, and tables, minor differences may occur.
Problem 10-1
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
P10-1 (Classification of Acquisition and Other Asset Costs) At December 31, 2011, certain accounts included in the property, plant, and equipment section of Reagan Company- balance sheet had the following balances.
Land $230,000
Buildings $890,000
Leasehold improvements $660,000
Machinery and equipment $875,000
During 2012 the following transactions occurred:
1. Land site number 621 was acquired for $850,000 In addition, to acquire the land Reagan paid a
$51,000 commission to a real estate agent. Costs of $35,000 were incurred
to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for
$13,000
2. A second tract of land (site number 622) with a building was acquired for $420,000
The closing statement indicated that the land value was $300,000 and the building value was
$120,000 Shortly after acquisition, the building was demolished at a cost of $41,000
A new building was constructed for $330,000 plus the following costs:
Excavation fees $38,000
Architectural design fees $11,000
Building permit fees $2,500
"Imputed interest on funds used during
construction (Stock financing)" $8,500
The building was completed and occupied on September 30, 2012.
3. A third tract of land (site number 623) was acquired for $650,000 and was put on the market
for resale.
4. During December 2012, costs of $89,000 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
$87,000 freight costs were $3,300 installation costs were $2,400
and royalty payments for 2010 were $17,500
Instructions:
(a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2012:
Land Leasehold Improvements
Buildings Machinery and Equipment
Disregard the related accumulated depreciation accounts.
REAGAN COMPANY
Analysis of Land Account for 2012
Balance, January 1, 2012 Amount
Land site number 621
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount Formula
Total land site number 621 Formula
Land site number 622
Text Title Amount
Text Title Amount
Text Title Amount
Total land site number 622 Formula
Balance at December 31, 2012 Formula
REAGAN COMPANY
Analysis of Building Account for 2012
Balance, January 1, 2012
Cost of new building constructed on land site number 622 Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount Formula
Balance at December 31, 2012 Formula
REAGAN COMPANY
Analysis of Leasehold Account for 2012
Balance, January 1, 2012 Amount
Text Title Amount
Balance at December 31, 2012 Formula
REAGAN COMPANY
Analysis of Machinery & Equipment Account for 2012
Balance, January 1, 2012 Amount
Cost of the new machines acquired
Text Title Amount
Text Title Amount
Text Title Amount Formula
Balance at December 31, 2012 Formula
"(b) List the items in the situation that were not used to determine the answer to (a) above, and indicate
where, or if, these items should be included in Reagan's financial statements."
Enter text answer as appropriate.
Enter text answer as appropriate.
Enter text answer as appropriate.
Problem 10-5
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
P10-5 (Classification of Costs and Interest Capitalization) On January 1, 2012, Blair Corporation
purchased for $500,000 a tract of land (site number 101) with a building. Blair paid a real estate
broker- commission of $36,000 , legal fees of $6,000 , and title guarantee insurance
of $18,000 . The closing statement indicated that the land value was
$500,000 and the building value was $100,000 . Shortly after acquisition, the building was
razed at a cost of $54,000
Blair entered into a $3,000,000 fixed-price contract with Slatkin Builders, Inc. on
March 1, 2012, for the construction of an office building on land site number 101. The building was completed and occupied on September 30, 2013. Additional construction costs were incurred as follows:
Plans, specifications, and blueprints $21,000
Architects fees for design and supervision $82,000
The building is estimated to have a 40 year life from date of completion and will be
depreciated using the 150% declining balance method.
To finance construction costs, Blair borrowed $3,000,000 on March 1, 2012. The loan
is payable in 10 annual installments of $300,000 plus interest at the rate of
10% Blair's weighted-average amounts of accumulated building construction expenditures
were as follows:
For the period March 1 to December 31, 2012 $1,300,000
For the period January 1 to September 30, 2013 $1,900,000
Instructions:
"(a) Prepare a schedule that discloses the individual costs making up the balance in the land account
in respect of land site number 101 as of September 30, 2013."
BLAIR CORPORATION
Cost of Land (Site #101)
As of September 30, 2013
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Cost of land Formula
"(b) Prepare a schedule that discloses the individual costs that should be capitalized in the office
building account as of September 30, 2013. Show supporting computations in good form."
BLAIR CORPORATION
Cost of Building
As of September 30, 2013
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Text Title Amount
Cost of building Formula
Interest to be capitalized:
2012 Amount × Percentage = Formula
2013 Amount × Percentage = Formula
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