On January 3, 2019, HDR Company acquired a tract of land just outside the city limits....
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On January 3, 2019, HDR Company acquired a tract of land just outside the city limits. The land and existing building were purchased for $4.8 million. HDR Company paid $800,000 and signed a noninterest-bearing note requiring the company to pay the remaining $4,000,000 on December 31, 2020. An interest rate of 7% properly reflects the time value of money for this type of loan agreement. Transfer taxes, title insurance, and other costs totaling $48,000 were paid at closing. During February, the old building was demolished at a cost of $240,000, and an additional $200,000 was paid to clear and grade the land. Construction of a new building began on March 1 and was completed on October 30. Čonstruction expenditures were as follows: March 31 June 30 July 31 September 1 $1,600,000 2,400,000 2,400,000 1,200,000 HDR Company did not borrow specifically for the construction project, but did have the following debt outstanding throughout 2019: S12,000,000, 8% long-term note payable $4,000,000, 5% long-term note payable In December 2019, the company purchased equipment and office furniture and fixtures for a lump-sum price of S1,600,000. The fair values of the equipment and the furniture and fixtures were $1,080,000 and S720,000, respectively. In December 2019, HDR paid $680,000 for the construction of parking lots and landscaping. Required: 1. Determine the initial values of the various assets that HDR acquired or constructed during 2019. (Hint: the assets mentioned are listed below;) a. Land b. Land Improvements c. Equipment d. Furniture and Fixtures e. Building 2. How much interest expense will HDR report in its 2019 income statement? On January 3, 2019, HDR Company acquired a tract of land just outside the city limits. The land and existing building were purchased for $4.8 million. HDR Company paid $800,000 and signed a noninterest-bearing note requiring the company to pay the remaining $4,000,000 on December 31, 2020. An interest rate of 7% properly reflects the time value of money for this type of loan agreement. Transfer taxes, title insurance, and other costs totaling $48,000 were paid at closing. During February, the old building was demolished at a cost of $240,000, and an additional $200,000 was paid to clear and grade the land. Construction of a new building began on March 1 and was completed on October 30. Čonstruction expenditures were as follows: March 31 June 30 July 31 September 1 $1,600,000 2,400,000 2,400,000 1,200,000 HDR Company did not borrow specifically for the construction project, but did have the following debt outstanding throughout 2019: S12,000,000, 8% long-term note payable $4,000,000, 5% long-term note payable In December 2019, the company purchased equipment and office furniture and fixtures for a lump-sum price of S1,600,000. The fair values of the equipment and the furniture and fixtures were $1,080,000 and S720,000, respectively. In December 2019, HDR paid $680,000 for the construction of parking lots and landscaping. Required: 1. Determine the initial values of the various assets that HDR acquired or constructed during 2019. (Hint: the assets mentioned are listed below;) a. Land b. Land Improvements c. Equipment d. Furniture and Fixtures e. Building 2. How much interest expense will HDR report in its 2019 income statement?
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10Land punchaie cash paid cost 800000 34937 60o present value d n... View the full answer
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