Posted: March 7th, 2014

At December 31, 2010, certain accounts included in the Noncurren

At December 31, 2010, certain accounts included in the Noncurren At December 31, 2010, certain accounts included in the Noncurrent Operating Assets section of Salvino Company’s balance sheet had the following balances: Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910,000 Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 During 2011, the following transactions occurred. (a) Land site 653 was acquired for $1,600,000. Additionally, to acquire the land, Salvino paid a $90,000 commission fee to a real estate agent. Costs of $25,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $20,000.

CLICK HERE TO GET THIS PAPER WRITTEN

(b) A second tract of land (site 654) with a building was acquired for $700,000. The closing statement indicated that the land value was $510,000 and the building value was $215,000. Shortly after acquisition, the building was demolished at a cost of $30,000. A new building was constructed for $600,000 plus the following costs. Excavation fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,000 Architectural design fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000 Building permit fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 Imputed interest on funds used during construction . . . . . . . . . . . . . 60,000 (Salvino had no interest-bearing debt outstanding during the construction period.) The building was completed and occupied on September 30, 2011. (c) A third tract of land (site 655) was acquired for $600,000 and was put on the market for resale. (d) Extensive work was done to a building occupied by Salvino under a lease agreement that expires on December 31, 2017. The total cost of work was $150,000, which consisted of the following. Painting ceilings . . . . . . . . . . . . . . . . . . $ 10,000 (estimated useful life is 1 year) Performing electrical work . . . . . . . . . . 60,000 (estimated useful life is 10 years) Constructing extension to current working area . . 80,000 (estimated useful life is 30 years) $150,000 The lessor paid half of the costs incurred in connection with the extension to the current working area. (e) During December 2011, costs of $70,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2013, and is not expected to be renewed. (f) A group of new machines was purchased under a royalty agreement that provides for payment of royalties based on units of production for the machines. The invoice price of the machines was $90,000, freight costs were $2,000, unloading charges were $2,500, and royalty payments for 2011 were $13,000. Instructions: 1. Prepare an analysis of the changes in each of the following balance sheet accounts for 2011. (Disregard the related accumulated depreciation accounts.) Land Buildings Leasehold improvements Machinery and equipment 2. List the items in the preceding information that were not used to determine the answer to (1), and indicate where, if at all, these items should be included in Salvino’s financial statements.

CLICK HERE TO GET THIS PAPER WRITTEN