The Pacioli Company, founded to promote accounting education throughout the world, had the following transactions in 2014:

The Pacioli Company, founded to promote accounting education throughout the world, had the following transactions in 2014:

a.On January 1, 2014, Pacioli exchanged a delivery truck for an accounting machine. The truck cost $200,000 and had accumulated depreciation of $40,000. The fair value of the truck was $175,000 and Pacioli paid $50,000 to complete the transaction. The transaction had commercial substance.

b. On January 1, 2014, Pacioli began construction on a new facility, the AHP Center, to accommodate Accounting Homework Parties all day, every day. Construction was completed on December 31, 2014. In 2014, Pacioli paid $75,000 for architect’s fees. The total construction cost of the AHP was $4,100,000. The average accumulated expenditures were $1,800,000.

No additional financing was necessary for the project. In 2014, Pacioli had the following debt outstanding:

$4,000,000, 8% bonds payable

$2,000,000, 11% long-term note payable

c. On December 31, 2014, Pacioli acquired land for the location of International Accounting Institute and Aquarium, home of a world-class accounting consortium combined with a splashy tourist attraction. Pacioli paid $500,000 on December 31 and signed a 5-year, noninterest-bearing, $5,000,000 note. An appropriate interest rate was 10%. Pacioli also paid $30,000 for title and closing costs and $40,000 for 2014 property taxes.

d. In 2014, Pacioli developed a revolutionary and innovative new product called the “T-ACCOUNT” that will be marketed to college accounting students. In 2014, Pacioli paid the following amounts related to the T-ACCOUNT

$1,000,000 paid for materials and labor used in activities for research and development of the T-ACCOUNT

$ 60,000 paid for legal and filing fees related to acquiring patent on the T-ACCOUNT

Determine the amounts Pacioli will capitalize as the cost for the assets acquired in 2014 based on the information above. Show the cost of each type of asset separately (e.g., accounting machine) and your work.