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KiRa [710]
3 years ago
8

Blue Co. purchased land as a factory site for $600,000. The process of tearing down two old buildings on the site and constructi

ng the factory required 6 months. The company paid $63,000 to raze the old buildings and sold salvaged lumber and brick for $9,450. Legal fees of $2,775 were paid for title investigation and drawing the purchase contract. Blue paid $3,300 to an engineering firm for a land survey, and $102,000 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $2,250, and a liability insurance premium paid during construction was $1,350. The contractor’s charge for construction was $4,110,000. The company paid the contractor in two installments: $1,800,000 at the end of 3 months and $2,310,000 upon completion. Interest costs of $255,000 were incurred to finance the construction. Determine the cost of the land and the cost of the building as they should be recorded on the books of Martin Buberk Co. Assume that the land survey was for the building.
Business
1 answer:
Harlamova29_29 [7]3 years ago
5 0

Answer

The answer and procedures of the exercise are attached in a microsoft excel document.  

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.  

Download xlsx
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Answer:

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Being entries to derecognize the cost of the Machine A

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Credit Other income/disposal account (p/l)  $28,000

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When the amount received from the disposal of an asset is higher than the carrying value of the asset, the company makes a gain on disposal. The proceed from the disposal of an asset may be recorded in the disposal or other income account.

On disposal, the carrying amount of the asset is derecognized by  

Debit Other income/disposal account (p/l)

Credit Asset account

with the cost of the asset, then,

Debit Accumulated depreciation account

Credit Other income/disposal account (p/l)

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Debit Cash account

Credit Other income/disposal account (p/l)

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