(LO 2 , 3 ) (ComprehensiveDepreciation Computations) Sheryl Crow Corporation, a
ID: 2433590 • Letter: #
Question
(ComprehensiveDepreciation Computations) Sheryl Crow Corporation, a manufacturerof steel products, began operations on October 1, 2006. The accountingdepartment of Crow has started the fixed-asset and depreciation schedulepresented on page 563. You have been asked to assist in completing thisschedule. In addition to ascertaining that the data already on theschedule are correct, you have obtained the following information fromthe company's records and personnel.
Present value of $1.00 at 8% Present value of an ordinary annuity of $1.00 at 8% 10 years.463
10 years
6.710
11 years
.429
11 years
7.139
15 years
.315
15 years
8.559
Explanation / Answer
(1) Calculating Cost ofthe Land A:
Land appraised value = $90,000
Building appraised value = $810,000
Crow paid for the land and building together = $820,000
Cost of the Land A = [{$90,000 / ($90,000 + $810,000)} *$820,000]
(2) Calculating Costof Building A:
Cost of Building A = [{$810,000 / ($90,000 + $810,000)} *$820,000]
(3) CalculatingEstimated Life in Years:
Depreciation = [(Cost of Equipment – Salvage Value) /Estimated Life]
Estimated Life = [(Cost of Equipment – Salvage Value) /Depreciation]
Estimated Life = [($738,000 - $40,000) / $17,450]
(4) Calculating yearended Depreciation:
(5) Calculating Cost ofLand B:
Crow’s Common Stock Value (2,500 new issued shares * $30per share)
Crow’s Common stock Value = $75,000
Crow paid $16,000 to demolish an existing building on this landso it could construct a new building.
Cost of Land B = $75,000 + $16,000
(10)Calculating Cost of MachineryA:
Machinery A Cost = [Machinery A’s total cost –Repairs and maintenance exp.]
Machinery A Cost = [$164,900 - $14,900]
Machinery A Cost = $150,000
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