E9.2 (LO1) Acquisition Costs of Realty
Martin Buber Co. tore down two old buildings on land it purchased as a factory site. The
process of tearing down two old buildings on the site and constructing the factory
required 6 months. The company incurred the following costs and acquisitions during the
year:
Purchased land as a factory site $ 400,000
Payment to raze old buildings 42,000
Sale of salvaged lumber and brick from razing 6,300
Legal fees paid for title investigation and drawing the purchase contract 1,850
Payment to an engineering firm for a land survey 2,200
(Survey had to be made before definitive plans could be drawn.)
Payment for drawing the factory plans 68,000
Title insurance on the property 1,500
Liability insurance premium during construction 900
Contractor’s charge for construction 2,740,000
Payment to the contractor - first installment at the end of 3 months 1,200,000
Payment to the contractor - second installment upon completion 1,540,000
Interest costs incurred to finance the construction 170,000
Instructions
Determine the cost of the land and the cost of the building as they should be recorded
on the books of Martin Buber Co. Assume that the land survey was for the building.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell),
into the yellow shaded input cells.
Description Land Building
,Solution: E9.2 (LO1) Acquisition Costs of Realty
Martin Buber Co. tore down two old buildings on land it purchased as a factory site. The
process of tearing down two old buildings on the site and constructing the factory
required 6 months. The company incurred the following costs and acquisitions during the
year:
Purchased land as a factory site $ 400,000
Payment to raze old buildings 42,000
Sale of salvaged lumber and brick from razing 6,300
Legal fees paid for title investigation and drawing the purchase contract 1,850
Payment to an engineering firm for a land survey 2,200
(Survey had to be made before definitive plans could be drawn.)
Payment for drawing the factory plans 68,000
Title insurance on the property 1,500
Liability insurance premium during construction 900
Contractor’s charge for construction 2,740,000
Payment to the contractor - first installment at the end of 3 months 1,200,000
Payment to the contractor - second installment upon completion 1,540,000
Interest costs incurred to finance the construction 170,000
Instructions
Determine the cost of the land and the cost of the building as they should be recorded
on the books of Martin Buber Co. Assume that the land survey was for the building.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell),
into the yellow shaded input cells.
Description Land Building
Land $ 400,000
Razing costs 42,000
Salvage (6,300)
Legal fees 1,850
Survey $ 2,200
Plans 68,000
Title insurance 1,500
Liability insurance 900
Construction 2,740,000
Interest 170,000
Total costs $ 439,050 $ 2,981,100
, E9.3 (LO3) Acquisition Costs of Trucks
Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to
customers, the company purchases four new trucks on April 1, 2025. The terms of acquisition
for each truck are described below.
1. Truck #1
List price $ 15,000
Cash acquisition cost 13,900
2. Truck #2
List price $ 16,000
Acquisition cost
Cash down payment 2,000
Face amount of zero-interest bearing note assumed 14,000
Note due date April 1, 2021
Normal interest rate for this borrowing 10%
Incremental borrowing rate 8%
3. Truck #3
List price $ 16,000
Acquired in exchange for a computer system that Clarkson carries
in inventory
Cost of computer system in inventory 12,000
Normal selling price of computer system by Clarkson 15,200
Inventory system used by Clarkson Perpetual
4. Truck #4
List price $ 14,000
Acquired in exchange for common stock in Clarkson Corporation
Number of shares 1,000
Par value of common stock per share $ 10.00
Market value of common stock per share $ 13.00
Instructions
Prepare the appropriate journal entries for the above transactions for Kelly Clarkson
Corporation.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
Martin Buber Co. tore down two old buildings on land it purchased as a factory site. The
process of tearing down two old buildings on the site and constructing the factory
required 6 months. The company incurred the following costs and acquisitions during the
year:
Purchased land as a factory site $ 400,000
Payment to raze old buildings 42,000
Sale of salvaged lumber and brick from razing 6,300
Legal fees paid for title investigation and drawing the purchase contract 1,850
Payment to an engineering firm for a land survey 2,200
(Survey had to be made before definitive plans could be drawn.)
Payment for drawing the factory plans 68,000
Title insurance on the property 1,500
Liability insurance premium during construction 900
Contractor’s charge for construction 2,740,000
Payment to the contractor - first installment at the end of 3 months 1,200,000
Payment to the contractor - second installment upon completion 1,540,000
Interest costs incurred to finance the construction 170,000
Instructions
Determine the cost of the land and the cost of the building as they should be recorded
on the books of Martin Buber Co. Assume that the land survey was for the building.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell),
into the yellow shaded input cells.
Description Land Building
,Solution: E9.2 (LO1) Acquisition Costs of Realty
Martin Buber Co. tore down two old buildings on land it purchased as a factory site. The
process of tearing down two old buildings on the site and constructing the factory
required 6 months. The company incurred the following costs and acquisitions during the
year:
Purchased land as a factory site $ 400,000
Payment to raze old buildings 42,000
Sale of salvaged lumber and brick from razing 6,300
Legal fees paid for title investigation and drawing the purchase contract 1,850
Payment to an engineering firm for a land survey 2,200
(Survey had to be made before definitive plans could be drawn.)
Payment for drawing the factory plans 68,000
Title insurance on the property 1,500
Liability insurance premium during construction 900
Contractor’s charge for construction 2,740,000
Payment to the contractor - first installment at the end of 3 months 1,200,000
Payment to the contractor - second installment upon completion 1,540,000
Interest costs incurred to finance the construction 170,000
Instructions
Determine the cost of the land and the cost of the building as they should be recorded
on the books of Martin Buber Co. Assume that the land survey was for the building.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell),
into the yellow shaded input cells.
Description Land Building
Land $ 400,000
Razing costs 42,000
Salvage (6,300)
Legal fees 1,850
Survey $ 2,200
Plans 68,000
Title insurance 1,500
Liability insurance 900
Construction 2,740,000
Interest 170,000
Total costs $ 439,050 $ 2,981,100
, E9.3 (LO3) Acquisition Costs of Trucks
Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to
customers, the company purchases four new trucks on April 1, 2025. The terms of acquisition
for each truck are described below.
1. Truck #1
List price $ 15,000
Cash acquisition cost 13,900
2. Truck #2
List price $ 16,000
Acquisition cost
Cash down payment 2,000
Face amount of zero-interest bearing note assumed 14,000
Note due date April 1, 2021
Normal interest rate for this borrowing 10%
Incremental borrowing rate 8%
3. Truck #3
List price $ 16,000
Acquired in exchange for a computer system that Clarkson carries
in inventory
Cost of computer system in inventory 12,000
Normal selling price of computer system by Clarkson 15,200
Inventory system used by Clarkson Perpetual
4. Truck #4
List price $ 14,000
Acquired in exchange for common stock in Clarkson Corporation
Number of shares 1,000
Par value of common stock per share $ 10.00
Market value of common stock per share $ 13.00
Instructions
Prepare the appropriate journal entries for the above transactions for Kelly Clarkson
Corporation.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into
the yellow shaded input cells.
