P10-2 (Classification of Acquisition Costs) Selected
accounts included in the property, plant, and equipment section of Lobo
Corporation's balance sheet at December 31, 2013, had the following balances.
|
Land
|
$ 300,000
|
|
Land
improvements
|
140,000
|
|
Buildings
|
1,100,000
|
|
Equipment
|
960,000
|
During 2014, the following
transactions occurred.
- 1.A tract of land was acquired for $150,000 as a
potential future building site.
- 2.A plant facility consisting of land and building was acquired
from Mendota Company in exchange for 20,000 shares of Lobo's common stock.
On the acquisition date, Lobo's stock had a closing market price of $37
per share on a national stock exchange. The plant facility was carried on
Mendota's books at $110,000 for land and $320,000 for the building at the
exchange date. Current appraised values for the land and building,
respectively, are $230,000 and $690,000.
- 3.Items of machinery and equipment were purchased at a
total cost of $400,000. Additional costs were incurred as follows.
|
Freight
and unloading
|
$13,000
|
|
Sales
taxes
|
20,000
|
|
Installation
|
26,000
|
- 4.Expenditures totaling $95,000 were made for new parking
lots, streets, and sidewalks at the corporation's various plant locations.
These expenditures had an estimated useful life of 15 years.
- 5.A machine costing $80,000 on January 1, 2006, was
scrapped on June 30, 2014. Double-declining-balance depreciation has been
recorded on the basis of a 10-year life.
- 6.A machine was sold for $20,000 on July 1, 2014. Original
cost of the machine was $44,000 on January 1, 2011, and it was depreciated
on the straight-line basis over an estimated useful life of 7 years and a
salvage value of $2,000.
Instructions
(Round to the nearest dollar.)
- (a)Prepare a detailed analysis of the changes in each of
the following balance sheet accounts for 2014.
|
Land
|
Buildings
|
|
Land
Improvements
|
Equipment
|
- (Hint: Disregard
the related accumulated depreciation accounts.)
- (b)List the items in the fact situation that were not used
to determine the answer to (a), showing the pertinent amounts and
supporting computations in good form for each item. In addition, indicate
where, or if, these items should be included in Lobo's financial
statements.
TUTORIAL PREVIEW
(a) LOBO CORPORATION
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Analysis of Land Account
| |||
2014
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Balance at January 1, 2014
|
$ 300,000
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File name: P10-2 Classification of Acquisition
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