Land:
Purchase of land will have no effect on the income statement of the company as it is a capital transaction and should be recorded on the Balance Sheet only. However, the condemnation activity resulted in a loss of $9000, therefore, this loss should be reported on the debit side of the income statement as loss from the extraordinary transaction.
Building:
Demolition doesn’t result in gain or loss, hence, it will not have any effect on the income statement of the company. On the other hand, purchase cost of land should be allocated to land account where demolition charges should be decreased.
Warehouse:
Only the realized gain of $20,000 resulting from the destruction of the warehouse should be reported as an extraordinary item. On the other hand, the purchase of another warehouse should not be included in the income statement and should be reported on the balance sheet of the company.
Machine:
The machine that was exchanged for another machine would need to recognize the gain on the income statement as the transaction lacks economic substance. While accounting for gain, the company will have to account for cost and accumulated depreciation of the old machine.
Furniture:
Even though the furniture was provided on charity, however, since this transaction was held with a qualified charitable organization, it should be reported on the income statement as the contribution expense of $3100 along with related gain on the disposition of the furniture, should be reported on the income statement.
Automobile:
The transaction resulted in a loss of $2580($5540-2960) for the organization and this loss on the sale of the automobile should be reported in the income statement of the company. However, since such transactions with the shareholders are very infrequent, the loss should be reported as an unusual item
