on 13 september 20x3, nitish corps board of directors moved the companys operations into a newly…

on 13 september 20x3, nitish corps board of directors moved the companys operations into a newly - constructed building and declared its old building available for sale. the original cost of the old building was $25 million, it was 30% depreciated. other information is as follows:\n\na. on 15 september, a professional appraisal of the old building estimated its value as $15 million.\n\nb. on 24 september, nitish engaged a commercial property developer to place the building on the market for $15 million. despite some softness in the market the developer expects to be able to sell the building within the next nine months. the developer charges a commission of 6% on final sale.\n\nc. by 31 december, the commercial real - estate market had \softened\ considerably. although the developer asked a price at $15 million, nitish and the developer agreed they would consider offers as low as $13.5 million.\n\nd. despite receiving several \lowball\ offers from prospective buyers over the first two months of 20x4, nitishs management did not accept any of the offers.\n\ne. by 31 march 20x4, the end of nitishs first reporting quarter, the market had improved considerably. the developer released the property at $16.5 million. its newly - accepted value.\n\nf. on 27 april 20x4, nitishs board accepted an offer of $16.7 million.\n\nrequired:\nprepare the appropriate general journal entries to record the information above.\nnote: if no entry is required for a transaction/event, select \no journal entry required\ in the first account field. enter your answers in whole dollars amount.

on 13 september 20x3, nitish corps board of directors moved the companys operations into a newly - constructed building and declared its old building available for sale. the original cost of the old building was $25 million, it was 30% depreciated. other information is as follows:\n\na. on 15 september, a professional appraisal of the old building estimated its value as $15 million.\n\nb. on 24 september, nitish engaged a commercial property developer to place the building on the market for $15 million. despite some softness in the market the developer expects to be able to sell the building within the next nine months. the developer charges a commission of 6% on final sale.\n\nc. by 31 december, the commercial real - estate market had \softened\ considerably. although the developer asked a price at $15 million, nitish and the developer agreed they would consider offers as low as $13.5 million.\n\nd. despite receiving several \lowball\ offers from prospective buyers over the first two months of 20x4, nitishs management did not accept any of the offers.\n\ne. by 31 march 20x4, the end of nitishs first reporting quarter, the market had improved considerably. the developer released the property at $16.5 million. its newly - accepted value.\n\nf. on 27 april 20x4, nitishs board accepted an offer of $16.7 million.\n\nrequired:\nprepare the appropriate general journal entries to record the information above.\nnote: if no entry is required for a transaction/event, select \no journal entry required\ in the first account field. enter your answers in whole dollars amount.

Answer

Explanation:

Step1: Calculate the book - value of the old building

The original cost of the building is $25$ million and it is $30%$ depreciated. The book - value ($BV$) is calculated as $BV=(1 - 0.30)\times25=$17.5$ million. No journal entry is required for the board's decision on 13 September 20X3.

Step2: Appraisal on 15 September 20X3

The appraisal value of $15$ million is not recorded as there is no transaction. So, No journal entry required.

Step3: Engagement with developer on 24 September 20X3

The engagement with the developer to place the building on the market is not a transaction that requires a journal entry. No journal entry required.

Step4: Market condition change on 31 December 20X3

The change in market condition does not trigger a journal entry as there is no transaction. No journal entry required.

Step5: Rejection of offers in 20X4

The rejection of offers does not require a journal entry as no transaction has occurred. No journal entry required.

Step6: Market improvement and new offer on 31 March 20X4

The market improvement and the new offer do not require a journal entry until the offer is accepted. No journal entry required.

Step7: Acceptance of offer on 27 April 20X4

When the offer of $16.7$ million is accepted, we need to record the following journal entry: Debit: Receivables (or a similar account) $16.7$ million Debit: Loss on Sale of Building ($17.5 - 16.7$) $0.8$ million Credit: Building (book - value) $17.5$ million

Answer:

Date Account Titles and Explanation Debit ($ in million) Credit ($ in million)
27 April 20X4 Receivables 16.7
Loss on Sale of Building 0.8
Building 17.5