215)
Schwartz Co. paid $780,000 cash to buy the plant assets of Kimberly Co. that went out of business.
An independent appraiser assigned the following values to the assets acquired:
Land
$522,000
Building
243,000
Equipment
135,000
Total
$900,000
Prepare Schwartz’ journal entry to record the acquisition of these assets.
216)
A company purchased a special purpose machine on September 15 of the past year, and it was
installed and ready to run on January 1 of this year. The following costs were incurred in the
purchase and installation of the machine. Determine the total cost of the machine.
Invoice price plus sales tax
$1,270,500
Freight costs
9,000
Setup costs
51,000
Costs to adjust machine to appropriate specifications
36,000
Electrical connections
32,000
Maintenance supplies for future use
108,000
Traffic fine incurred during transport of machine
300
Cost of special foundation for machine
18,500
217)
A company paid $595,000 for property that included land appraised at $384,000; land improvements
appraised at $128,000; and a building appraised at $288,000. The plan is to use the building as a
manufacturing plant. Determine the amounts that should be recorded as:
a)
$
b)
$
c)
$
218)
Prepare journal entries to record the following transactions of a company during the current year:
Mar 1 Purchased a truck for $40,000 with a 5-year useful life and a $5,000 salvage value. Also
paid 6% sales tax, $350 for the annual truck license, $300 to paint the truck with the company’s
colors and name, and $1,500 for maintenance supplies for the future. All payments were in cash.
Mar 10 Purchased a garage from a neighboring business with a 7%, 4-year, $67,000 note. The
seller’s book value for the garage was $42,750. The estimated remaining useful life of the garage is
10 years.
July 5 Paid $800 cash to replace (uninsured) garage windows broken during a storm.
Aug 25 Purchased used shop equipment for $10,700 cash. Sales tax was $825, freight costs $250,
$3,200 for a special base to house the equipment, and reconditioning costs $900, all of which were
paid in cash. The estimated useful life of the equipment is 3 years and salvage value is $500.
Oct 5 Purchased office equipment for $11,500 cash. Paid $1,290 in sales tax, $550 for repairs
incurred from damage during installation, and $2,200 for supplies to be used for periodic preventive
maintenance. The estimated useful life of the equipment is 8 years and salvage value is $1,200.
219)
A company purchased equipment on June 28 of the current year and placed it in service on August
1. The following costs were incurred in acquiring the equipment:
Purchase (invoice) price
$215,600
Transportation
1,400
Insurance during shipping
200
One-year fire insurance beginning August 1 of the current year
1,200
Installation cost
4,500
Raw materials and direct labor used to test the equipment.
1,500
Determine the amount to be recorded as cost for the equipment.
220)
A company purchased land with a building for a lump-sum cost of $2,570,000 ($500,000 paid in
cash and the balance on a long-term note). It was estimated that the land and building had market
values of $600,000 and $2,400,000, respectively.
Determine the cost to be apportioned to the land and to the building and prepare the journal entry to
record the acquisition.
221)
A company needed a new building. It found a suitable location with an existing old building on the
land. The company reached an agreement to buy the land and the building for $960,000 cash. The
old building was demolished to make way for the needed new building. Following is information
regarding the demolition of the old building and construction of the new one:
Construction cost of new building
$8,900,000
Cost for parking lot
$260,000
Demolition of old building
200,000
Proceeds from sale of salvaged materials from old building
70,000
Prepare a single journal entry to record the above costs assuming all transactions are paid in cash.
148
222)
A company purchased land on which to construct a new building for a cost of $350,000. Additional
costs incurred were:
Real estate broker’s commissions
$24,500
Legal fees incurred in purchase of the real estate
1,500
Landscaping
8,000
Cost to remove old house located on land
3,000
Proceeds from selling materials salvaged from old house
1,000
What total dollar amount should be charged to Land and what amount should be charged to Building
or other accounts?
Cost of land
Broker’s commission
Legal fees
1,500
Cost to remove old building
3,000
Salvage of old building
223)
A company made the following expenditures in connection with the construction of a new
building:
Architect’s fees
$ 12,000
Cash paid for land and unusable building on the land
300,000
Removal of old building
18,000
Salvage from sale of old building materials
(4,000)
Construction survey
1,500
Legal fees for title search
3,000
Excavation for basement construction
25,000
Machinery purchased for operations
Storage and delivery charges on machinery because building
was not ready when machinery was delivered
100,000
900
Freight on machinery purchased
1,600
Construction costs of new building
1,000,000
Installation of machinery
2,500
Prepare a schedule showing the amounts to be recorded as Land, Buildings, and Machinery.
224)
A new machine costing $1,800,000 cash and estimated to have a $60,000 salvage value was
purchased on January 1. The machine is expected to produce 600,000 units of product during its
8-year useful life. Calculate the depreciation expense in the first year under the following
independent situations:
1. The company uses the units-of-production method and the machine produces 70,000 units of
product during its first year.
2. The company uses the double-declining-balance method.
3. The company uses the straight-line method.
Year 1
Year 2
Year 3
Year 4
Year 5
Totals
225)
A company purchased a machine on January 1 of the current year for $750,000. Calculate the
annual depreciation expense for each year of the machine’s life (estimated at 5 years or 20,000
hours, with a salvage value of $75,000) using each of the below-mentioned methods. During the
machine’s 5-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours.
Straight–line
Units-of-production
Double-declining balance
Year 1
Year 2
Year 3
Year 4
Year 5
Totals
226)
A company purchased an equipment system for $325,000 on January 2. The company expects the
equipment to last for eight years or 81,250 hours of operation, with no estimated salvage value.
During the first year, the equipment was in operation for 8,000 hours, while in the second year, the
equipment was in operation for 8,700 hours. Compute the depreciation expense relating to the
equipment for Year 1 and Year 2 using the following depreciation methods:
a. Straight-line.
b. Double-declining-balance.
c. Units-of-production.
227)
On January 1, a machine costing $260,000 with a 6-year life and an estimated $5,000 salvage value
was purchased. It was also estimated that the machine would produce 500,000 units during its life.
The actual units produced during its first year of operation were 110,000. Determine the amount of
depreciation expense for the first year under each of the following assumptions:
1. The company uses the straight-line method of depreciation.
2. The company uses the units-of-production method of depreciation.
3. The company uses the double-declining-balance method of depreciation.
228)
Suarez Company uses the straight-line method of depreciation. The company purchased a computer
system on January 1, Year 1, for $1,600,000 with an expected life of six years and a salvage value
of $130,000. Assuming the computer is sold on July 1, Year 3 for $1,000,000 cash, prepare the
journal entries to record depreciation for the first 6 months of Year 3 and the sale of the computer.
229)
A company paid $320,000 for equipment that was expected to last five years and to have a salvage
value of $40,000. During the third year of the equipment’s life, $39,000 cash was paid for
replacement parts that were expected to increase productivity by 10% each year. Prepare the
journal entry to record the $39,000 cost incurred in the third year.
230)
On January 1, a company purchased machinery for $75,000 that had a 6-year useful life and a
salvage value of $6,000. After three years of straight-line depreciation, the company paid $8,500
cash at the beginning of the year to improve the efficiency of the machinery. The productivity of
the machinery was improved without increasing its remaining useful life or changing its salvage
value. Straight-line depreciation is used throughout the machinery’s life.
1. Prepare the journal entry to record the $8,500 expenditure.
2. Prepare the journal entry to record depreciation expense for the fourth year.
231)
A company sold a machine that originally cost $90,000 for $28,000 cash. The accumulated
depreciation on this machine was $47,000 at the time of the sale. What was the company’s gain or
loss on this sale?
232)
Wallace Company had a building that was destroyed by fire. The building originally cost $650,000,
and its accumulated depreciation as of the date of the fire was $300,000. The company received
$320,000 cash from an insurance policy that covered the building and will use that money to help
rebuild. Prepare the single journal entry to record the disposal of the building and the receipt of
cash from the insurance company.
233)
On April 1, 2015, due to obsolescence resulting from a new technology, a company discarded a
computer that cost $5,000, had a useful life of 4 years, and a salvage value of $400. Based on
straight-line depreciation, the accumulated depreciation as of December 31, 2014 was $3,450.
a. Prepare the journal entry to record depreciation up to the date of disposal of the computer.
b. Prepare the journal entry to record the disposal of the computer.
234)
On April 1 of the current year, a company disposed of a truck that had cost $20,000. The truck had
a salvage value of $2,000, and a useful life of 5 years. The accounting records showed
accumulated depreciation for this truck of $8,100 as of April 1 of the current year. The asset was
discarded after an accident, and $10,500 cash was received from an insurance claim. Prepare the
journal entry to record the disposal of the truck.
235)
Anderson Company sold a piece of equipment for $28,000 cash on December 31 after recording
the annual depreciation on the asset. The equipment had an original cost of $97,500 and
accumulated depreciation of $63,000. Prepare the general journal entry to record the sale of this
asset.