AC301 A1

Martin Buber Co. purchased land as a factory site for $757,600. The process of tearing down two old buildings on the site and constructing the factory required 6 months. The company paid $79,548 to raze the old buildings and sold salvaged lumber and brick for $11,932. Legal fees of $3,504 were paid for title investigation and drawing the purchase contract. Martin Buber paid $4,167 to an engineering firm for a land survey, and $128,792 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $2,841, and a liability insurance premium paid during construction was $1,705. The contractor’s charge for construction was $5,189,560. The company paid the contractor in two installments: $2,272,800 at the end of 3 months and $2,916,760 upon completion. Interest costs of $321,980 were incurred to finance the construction. Determine the cost of the land and the cost of the building as they should be recorded on the books of Martin Buberk Co. Assume that the land survey was for the building.

Cost of the Land		$
Cost of the Building		$

Exercise 10-17

Busytown Corporation, which manufactures shoes, hired a recent college graduate to work in its accounting department. On the first day of work, the accountant was assigned to total a batch of invoices with the use of an adding machine. Before long, the accountant, who had never before seen such a machine, managed to break the machine. Busytown Corporation gave the machine plus $667 to Dick Tracy Business Machine Company (dealer) in exchange for a new machine. Assume the following information about the machines.

		Busytown Corp. (Old Machine)		Dick Tracy Co. (New Machine)
Machine cost		$569			$529
Accumulated depreciation		275			–0–
Fair value		166			833

For each company, prepare the necessary journal entry to record the exchange. (The exchange has commercial substance.)  (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
Busytown Corporation
Dick Tracy Business Machine Company
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