P10-4 (LO1,4,6) GROUPWORK (Dispositions, Including Condemnation, Demolition,
and Trade-In) Presented below is a schedule of property dispositions for Hollerith Co.
Schedule of Property Dispositions
Cost
Accumulated
Depreciation
Cash
Proceeds
Fair
Value
Nature of
Disposition
$31,000
Condemnation
—
Demolition
Land
$40,000 —
$31,000
Building
15,000 —
3,600
Warehouse 70,000 $16,000
Machine
8,000
2,800
Furniture
10,000
7,850
Automobile 9,000
3,460
74,000
74,000
900
7,200
Trade-in
3,100
Contribution
2,960
Sale
—
2,960
Destruction by fire
The following additional information is available.
Land: On February 15, a condemnation award was received as consideration for
unimproved land held primarily as an investment, and on March 31, another parcel of
unimproved land to be held as an investment was purchased at a cost of $35,000.
Building: On April 2, land and building were purchased at a total cost of $75,000, of which
20% was allocated to the building on the corporate books. The real estate was acquired
with the intention of demolishing the building, and this was accomplished during the
month of November. Cash proceeds received in November represent the net proceeds from
demolition of the building.
Warehouse: On June 30, the warehouse was destroyed by fire. The warehouse was
purchased January 2, 2014, and had depreciated $16,000. On December 27, the insurance
proceeds and other funds were used to purchase a replacement warehouse at a cost of
$90,000.
Machine: On December 26, the machine was exchanged for another machine having a fair
value of $6,300 and cash of $900 was received. (The exchange lacks commercial
substance.)
Furniture: On August 15, furniture was contributed to a qualified charitable organization.
No other contributions were made or pledged during the year.
Automobile: On November 3, the automobile was sold to Jared Winger, a stockholder.
Instructions
Indicate how these items would be reported on the income statement of Hollerith Co.
P10-6 (LO1,3) (Interest During Construction) Grieg Landscaping began construction
of a new plant on December 1, 2017. On this date, the company purchased a parcel of
land for $139,000 in cash. In addition, it paid $2,000 in surveying costs and $4,000 for
a title insurance policy. An old dwelling on the premises was demolished at a cost of
$3,000, with $1,000 being received from the sale of materials.
Architectural plans were also formalized on December 1, 2017, when the architect was
paid $30,000. The necessary building permits costing $3,000 were obtained from the
city and paid for on December 1 as well. The excavation work began during the first week
in December with payments made to the contractor in 2018 as follows.
Date of Payment Amount of Payment
March 1
$240,000
May 1
330,000
July 1
60,000
The building was completed on July 1, 2018.
To finance construction of this plant, Grieg borrowed $600,000 from the bank on
December 1, 2017. Grieg had no other borrowings. The $600,000 was a 10-year loan
bearing interest at 8%.
Instructions
Compute the balance in each of the following accounts at December 31, 2017, and
December 31, 2018. (Round amounts to the nearest dollar.)
(a)Land.
(b)Buildings.
(c)Interest Expense.
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