60.1K

Verified Solution

Link Copied!

On January 3, 2019, HDR Company acquired a tract of land just outside the city limits. The land and existing building were purchased for $4.8 million. HDR Company paid $800,000 and signed a noninterest-bearing note requiring the company to pay the remaining $4,000,000 on December 31, 2020. An interest rate of 7% properly reflects the time value of money for this type of loan agreement. Transfer taxes, title insurance, and other costs totaling $48,000 were paid at closing.

During February, the old building was demolished at a cost of $240,000, and an additional $200,000 was paid to clear and grade the land. Construction of a new building began on March 1 and was completed on October 30. Construction expenditures were as follows:

March 31 $1,600,000

June 30 2,400,000

July 31 2,400,000

September 1 1,200,000

HDR Company did not borrow specifically for the construction project, but did have the following debt outstanding throughout 2019:

$12,000,000, 8% long-term note payable

$4,000,000, 5% long-term note payable

In December 2019, the company purchased equipment and office furniture and fixtures for a lump-sum price of $1,600,000. The fair values of the equipment and the furniture and fixtures were $1,080,000 and $720,000, respectively. In December 2019, HDR paid $680,000 for the construction of parking lots and landscaping.

Required:

1. Determine the initial values of the various assets that HDR acquired or constructed during 2019. (Hint: the assets mentioned are listed below: )
   1. Land
   2. Land Improvements
   3. Equipment
   4. Furniture and Fixtures
   5. Building

Answer & Explanation Solved by verified expert

See Answer