Land $ 230,000
Buildings 890,000
Leasehold improvements 660,000
Machinery and equipment 875,000
During 2025, the following transactions occurred:
1. Cost of land site number 621 acquired $ 850,000
Commission to a real estate agent to acquire land 51,000
Cost of clearing land 35,000
Sale of timber and gravel that were recovered during the land clearing 13,000
2. Second tract of land (site number 622) with a building $ 420,000
Land value as indicated on the closing statement 300,000
Building value as indicated on the closing statement 120,000
Cost of demolition of the building shortly after acquisition 41,000
Cost of new building constructed 330,000
Additional costs of constructing building:
Excavation fees 38,000
Architectural design fees 11,000
Building permit fees 2,500
Imputed interest on funds used during construction (stock financing) 8,500
Completion and occupancy date of building Sept. 30, 2025
3. Acquisition of a third tract of land (site number 623) (Put on the market for resal $ 650,000
4. $ 89,000
5.
Invoice price of the machines $ 87,000
Freight costs 3,300
Installation costs 2,400
Royalty payments for 2025 17,500
(AICPA adapted)
P9.1 (LO1) Classification of Acquisition and Other Asset Costs
At December 31, 2024, certain accounts included in the property, plant, and equipment section
of Reagan Company’s balance sheet had the following balances.
Costs of improving leased office during December 2025. The related lease will
terminate on December 31, 2027, and is not expected to be renewed.
(Hint: Leasehold improvements should be handled in the same manner as land
improvements.)
Purchase of a group of new machines under a royalty agreement that provides
for payment of royalties based on units of production for the machines
Instructions
a.
Land
Buildings
Leasehold Improvements
Equipment
Disregard the related accumulated depreciation accounts.
b.
a. REAGAN COMPANY
Analysis of Land Account for 2025
Balance, January 1, 2025
Land site number 621
Total land site number 621
Land site number 622
Balance at December 31, 2025
REAGAN COMPANY
Analysis of Buildings Account for 2025
Balance, January 1, 2025
Balance at December 31, 2025
Prepare a detailed analysis of the changes in each of the following balance sheet accounts for
2025:
List the items in the situation that were not used to determine the answer to (a) above, and
indicate where, or if, these items should be included in Reagan's financial statements.
NOTE: Enter a formula, a cell reference, or a value (if you are unable to reference a cell), into the
yellow shaded input cells.
REAGAN COMPANY
Analysis of Leasehold Improvements Account for 2025
Balance, January 1, 2025
Office space
Balance at December 31, 2025
REAGAN COMPANY
Analysis of Equipment Account for 2025
Balance, January 1, 2025
Balance at December 31, 2025
b.