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Category > Accounting Posted 08 Aug 2017 My Price 15.00

Timberly Construction

Timberly Construction negotiates a lump-sum purchase of several assets from a company that is going out of business. The purchase is completed on January 1, 2015, at a total cash price of $840,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $472,800; land, $325,050; land improvements, $29,550; and four vehicles, $157,600. The company’s fiscal year ends on December 31.

 

 

1.1

Prepare a table to allocate the lump-sum purchase price to the separate assets purchased.
   

1.2

Prepare the journal entry to record the purchase.
   

Compute the depreciation expense for year 2015 on the building using the straight-line method, assuming a 15-year life and a $30,000 salvage value.(Round your answers to the nearest whole dollar.)

  
   
     

 

2.

Compute the depreciation expense for year 2015 on the land improvements assuming a five-year life and double-declining-balance depreciation.

 

A machine costing $212,200 with a four-year life and an estimated $19,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 483,000 units of product during its life. It actually produces the following units: 121,700 in 1st year, 124,100 in 2nd year, 121,600 in 3rd year, 125,600 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)

 

 

 

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method. (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole dollar.)
 

3.

In January 2015, Mitzu Co. pays $2,650,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $671,000, with a useful life of 20 years and a $85,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $457,500 that are expected to last another 15 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,921,500. The company also incurs the following additional costs:

 

 

Cost to demolish Building 1 $ 347,400

Cost of additional land grading 195,400

Cost to construct new building (Building 3), having a useful life

of 25 years and a $398,000 salvage value 2,262,000

Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value 173,000

 

a.

Allocate the costs incurred by Mitzu to the appropriate columns and total each column. (Round your percentage answers to the nearest whole number.)
   

4.

Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2015.
   

Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2015 when these assets were in use.

 

5.

Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business.

 

2014

Jan.

1

Paid $314,000 cash plus $12,560 in sales tax and $1,700 in transportation (FOB shipping point) for a new loader. The loader is estimated to have a four-year life and a $31,400 salvage value. Loader costs are recorded in the Equipment account.

Jan.

3

Paid $7,000 to enclose the cab and install air-conditioning in the loader to enable operations under harsher conditions. This increased the estimated salvage value of the loader by another $2,100.

Dec.

31

Recorded annual straight-line depreciation on the loader.

 

2015

Jan.

1

Paid $4,600 to overhaul the loader’s engine, which increased the loader’s estimated useful life by two years.

Feb.

17

Paid $1,150 to repair the loader after the operator backed it into a tree.

Dec.

31

Recorded annual straight-line depreciation on the loader.

 

 

Prepare journal entries to record these transactions and events.
 

 

6.

Yoshi Company completed the following transactions and events involving its delivery trucks.

 

2014

Jan.

1

Paid $22,015 cash plus $1,485 in sales tax for a new delivery truck estimated to have a five-year life and a $2,150 salvage value. Delivery truck costs are recorded in the Trucks account.

Dec.

31

Recorded annual straight-line depreciation on the truck.

 

2015

Dec.

31

Due to new information obtained earlier in the year, the truck’s estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,550. Recorded annual straight-line depreciation on the truck.

 

2016

Dec.

31

Recorded annual straight-line depreciation on the truck.

Dec.

31

Sold the truck for $5,500 cash.

 

 

7. Calculate book value and gain (loss) for sale of Truck on December, 2016.

Prepare journal entries to record these transactions and events.
 

 

 

8.

Onslow Co. purchases a used machine for $240,000 cash on January 2 and readies it for use the next day at a $8,000 cost. On January 3, it is installed on a required operating platform costing $1,600, and it is further readied for operations. The company predicts the machine will be used for six years and have a $28,800 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year in operations, it is disposed of.

 

 

 

1.

Prepare journal entries to record the machine's purchase and the costs to ready and install it. Cash is paid for all costs incurred.
   

 


Prepare journal entries to record depreciation of the machine at December 31.

 

(a)

Its first year in operations.
   

 

b)

The year of its disposal.
   

3.

Prepare journal entries to record the machine's disposal under each of the following separate assumptions:

 

(a)

It is sold for $21,000 cash.
   

 

(b)

It is sold for $84,000 cash.
   

 

(c)

It is destroyed in a fire and the insurance company pays $31,500 cash to settle the loss claim.

 

 

On July 23 of the current year, Dakota Mining Co. pays $7,290,000 for land estimated to contain 9,720,000 tons of recoverable ore. It installs machinery costing $1,458,000 that has a 10-year life and no salvage value and is capable of mining the ore deposit in eight years. The machinery is paid for on July 25, seven days before mining operations begin. The company removes and sells 502,250 tons of ore during its first five months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined.

 

 

Prepare entries to record the following.(Do not round your intermediate calculations. Round "Depletion per ton" to two decimal places and round all other answers to the nearest whole dollar.)

 

(a)

To record the purchase of the land.
   

(b)

To record the cost and installation of machinery.
   

 

(c)

To record the first five months' depletion assuming the land has a net salvage value of zero after the ore is mined.
   

 

(d)

To record the first five months' depreciation on the machinery.
   

On July 1, 2010, Falk Company signed a contract to lease space in a building for 20 years. The lease contract calls for annual (prepaid) rental payments of $100,000 on each July 1 throughout the life of the lease and for the lessee to pay for all additions and improvements to the leased property. On June 25, 2015, Falk decides to sublease the space to Ryan & Associates for the remaining 15 years of the lease—Ryan pays $240,000 to Falk for the right to sublease and it agrees to assume the obligation to pay the $100,000 annual rent to the building owner beginning July 1, 2015. After taking possession of the leased space, Ryan pays for improving the office portion of the leased space at a $450,000 cost. The improvements are paid for by Ryan on July 5, 2015, and are estimated to have a useful life equal to the 15 years remaining in the life of the building.

 

 

 

1.

Prepare entries for Ryan to record:

 

(a)

Its payment to Falk for the right to sublease the building space.
   

 

(b)

Its payment of the 2015 annual rent to the building owner.
   

 

(c)

Its payment for the office improvements.
   

 

 

 

2.

Prepare Ryan's year-end adjusting entries required at December 31, 2015. (Round your answers to nearest whole dollar.)
   

 

(a)

To amortize the $240,000 cost of the sublease.
   

 

(b)

To amortize the office improvements.
   

 

(c)

To record rent expense.

 

Answers

Maurice Tutor
(5)
Status NEW Posted 08 Aug 2017 10:08 PM My Price 15.00

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