Asset Acquisition: At 31 December 20X4, certain accounts included in the property, plant, and equipment section of Hint Corporation’s balance sheet had the following balances:
Land .................. $ 1,200,000
Buildings ................ 2,600,000
Leasehold improvements ........... 1,600,000
Machinery and equipment ........... 3,200,000
During 20X5, the following transactions occurred:
a. Land site number 101 was acquired for $ 6,000,000. Additionally, to acquire the land, Hint paid a $ 360,000 commission to a real estate agent. Costs of $ 60,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $ 32,000.
b. A second tract of land (site number 102) with a building was acquired for $ 1,200,000. The closing statement indicated that the land value was $ 800,000 and the building value was $ 400,000. Shortly after acquisition, the building was demolished at a cost of $ 80,000. A new building was constructed for $ 600,000 plus the following costs:
Excavation fees............. $ 24,000
Architectural design fees ........ 32,000
Building permit fee .......... 8,000
The building was completed and occupied on 30 September 20X5.
c. A third tract of land (site number 103) was acquired for $ 3,000,000 and was put on the market for resale.
d. Extensive work was done to a building occupied by Hint under a lease agreement that expires on 31 December 20X14. The total cost of the work was $ 500,000, as follows:

The lessor paid half the costs incurred for the extension to the current working area.
e. During December 20X5, $ 240,000 was spent to improve leased office space.
f. A group of new machines was purchased subject to a royalty agreement, which requires payment of royalties based on units of production for the machines. The invoice price of the machines was $ 540,000, freight costs were $ 4,000, unloading costs were $ 6,000, and royalty payments for 20X5 were $ 88,000.

Disregard the related accumulated depreciation accounts.
1. Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 20X5:
a. Land b. Buildings
c. Leasehold improvements
d. Machinery and equipment
2. What items would appear on the SCF in relation to the accounts in part (1)?

  • CreatedFebruary 17, 2015
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