On January 3, 2024, Michelson & Sons acquired a tract of land just outside the city limits. The land andexisting building were purchased for $2.4 million. Michelson paid $400,000 and signed a noninterest-bearingnote requiring the company to pay the remaining $2,000,000 on December 31, 2025. An interest rate of 7%properly reflects the time value of money for this type of loan agreement. Transfer taxes, title insurance, andother costs totaling $24,000 were paid at closing.At the end of February, the old building was demolished at a cost of $120,000, and an additional $100,000was paid to clear and grade the land. Construction of a new building began on March 1 and was completedon October 30. Construction expenditures were as follows:$ 800,000March 30June 30July 301,200,000September 1 600,000Michelson did not borrow specifically for the construction project, but did have the following debt outstandingthroughout 2024:1,200,000$6,000,000, 8% long-term note payable$2,000,000, 5% long-term note payableIn December, the company purchased equipment and office furniture and fixtures for a lump-sum price of$800,000. The fair values of the equipment and the furniture and fixtures were $540,000 and $360,000,respectively. In December, Michelson paid $340,000 for the construction of parking lots and landscaping.Required:1. Determine the initial values of the various assets that Michelson acquired or constructed during 2024.2. How much interest expense will Michelson report in its 2024 income statement?

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Description: On January 3, 2024, Michelson & Sons acquired a tract of land just outside the city limits. The land andexisting building were purchased for $2.4 million. Michelson paid $400,000 and signed a noninterest-bearingnote requiring the company to pay the

Michelson & Sons acquired a land outside a city limit for agreed amount of $2.4 million.$400000…

Answered: Required: 1. Determine the initial…

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Required: 1. Determine the initial values of the various assets that Michelson acquired or constructed during 2024. 2. How much interest expense will Michelson report in its 2024 income statement?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 10MC: On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major...

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