Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 16 Problem 16-11

Leasehold

Land Building improvements Machinery

Balances, Jan. 1 1,500,000 4,000,000 500,000 1,000,000

Acquisition of land - #621:

Purchase price 3,000,000

Commission 60,000

Clearing cost 15,000

Sale of timber and gravel ( 5,000)

Acquisition of land - #622:

Purchase price 4,000,000

Cost of demolition 300,000

New building:

Construction cost 5,000,000

Excavation fee 50,000

Architectural design 150,000

Building permit 40,000

Improvements:

Electrical work 350,000

Construction extension

(800,000 x 1/2) 400,000

Improvements on office space 650,000

Purchase of new machine:

Invoice price 1,750,000

Freight 20,000

Unloading charge _____ _ ___ 30,000

Balances, December 31 8,870,000 9,240,000 1,900,000 2,800,000

The third tract of land should be presented as current asset because it was “classified as held for sale”.