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David Inc. incurred the following costs associated with the purchase of a piece of land that it will use to build an office building:

Sale price of land $500,000

Sale of salvaged material on land 20,000

Demolition of old building on land 10,000

Ground breaking ceremony refreshments 1,500

Legal fees to lawyers for the deed 7,500

What amount should David Inc. record the land for?

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Jean Keeling
Jean KeelingLv2
30 Sep 2019

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5. On December 1, 2014, Hogan Co. purchased a tract of land as a factory site for $750,000. The old

building on the property was demolished, and salvaged materials resulting from demolition were sold.

Additional costs incurred and salvage proceeds realized during December 2014 were as follows:

Cost to demolish old building $70,000

Legal fees for purchase contract and to record ownership 10,000

Title guarantee insurance 16,000

Proceeds from sale of salvaged materials 8,000

In Hogan 's December 31, 2014 balance sheet, what amount should be reported as land?

A. $776,000 B. $812,000 C. $838,000 D. $846,000

Oh No! Manufacturing Co. was incorporated on 1/2/04 but wasunable to begin manufacturing activities until 8/1/04 because newfactory facilities were not completed until that date. The Land andBuilding account at 12/31/04 per the books was as follows:

Date Item
1/31/04 Land and dilapidated building $320,000
2/28/04 Cost of removing building 5,000
4/1/04 Legal fees 6,000
5/1/04 Fire insurance premium payment 7,200
5/1/04 Special tax assessment for streets 5,500
5/1/04 Partial payment of new building construction 180,000

8/1/04 Final payment on building construction 160,000

8/1/04 General expenses 30,000
12/31/04 Asset write-up 75,000

Total: $788,700

Additional information:

1. To acquire the land and building on 1/31/04, the company paid$10,000 cash and 1,000 shares of its common stock (par value =$100/share) which is very actively traded and had a market valueper share of $410.

2. When the old building was removed, Potts paid Kwik DemolitionCo. $5,000, but also received $2,000 from the sale of salvagedmaterial.

3. Legal fees covered the following:

Cost of organization 2,000

Examination of title covering purchase of land 2,500

Legal work in connection with the building construction1,500

Total: $6,000

4. The fire insurance premium covered premiums for a three-yearterm beginning May 1, 2004.

General expenses covered the following for the period 1/2/04 to8/1/04.

President's salary $20,000

Plant superintendent covering supervision of new building$10,000

Total: $30,000

6. Because of the rising land costs, the president was sure thatthe land was worth at least $75,000 more than what it cost thecompany.

Instructions

1. Determine the proper balances as of 12/31/04 for a separateland account and a separate building account. Use separateT-accounts (one for land and one for building) labeling all therelevant amounts and disclosing all computations.

Q3: Nonmonetary exchange.

Filla Co. has a machine that cost $170,000 on March 20, 2000.This old machine had an estimated life of ten years and a salvagevalue of $10,000. On December 31, 2004, the old machine isexchanged for a similar machine with a market value of $108,000.Filla also received $10,000 cash. The last fiscal period ended onDecember 31, 2003, and the company uses straight-line depreciationis used. Assume no commercial substance.

Instructions

(a) Show the calculation of the amount of gain or loss to berecognized by Filla Co. from the exchange. (Round to the nearestdollar.)

(b) Prepare all entries that are necessary on December 31, 2004.Show a check of the amount recorded for the new machine.

Fill form 1040 for income tax; show your work and calculation.(round off to the nearest dollar). Ignore any exemption phase out orestimated penalty; also ignore max tax rate for capital gain andqualified dividend. All property is considered held over one yearunless otherwise indicated. Determine the tax owed/refund due.

The tax year is 2015

Taxpayer is divorced, age 30 . She has custodyof her 10 years old son who resides with her.

Taxpayer is employed as an accountant with Countmein, Inc., andshe also has private accounting practice.

Receipts:

Wages $70,000

Private accounting income $30,000

Interest from Bank On Me bank $1,000

Medical insurance premiums paid by employer $2,400

Group term life insurance paid by employer (face amount is twiceher salary)

Rent from duplex $20,000

Proceeds from sale of Coke stock $12,000 (basis $14,000)

Proceeds from sale of personal car $14,000 (cost $10,000)

Proceeds from sale of land (gift from father whose basis was$5,000; fmv $18,000 at date of gift, no gift tax paid)

Expenses:

Accounting business: part-time staff $10,000; supplies $1,000;purchase computer $5,000; rent $6,000. (Take min depreciation)

Apartment: purchased building for $100,000 (9/1/2004), taxes$3,000, mortgage interest $7,000

Personal taxes paid: federal withholding $15,000; federalestimated $2,000; state and local withholding $2,500; taxes onresidence $2,000; property taxes on personal auto $500

Interest: mortgage on residence $5,000

Contribution to university: $2,000

Child care expense while working $1,000

Son’s doctor bills $1,500

Seminar fee of $1,000 for updating accounting skills

MISC:

Car accident totaled (fare market value $15,000. Basis $20,000;insurance reimburse $10,000)

Friend filed bankruptcy so $1,000 loan will not be repaid

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