1.Leslie manufacturing company purchased land adjacent to its factory for the in
ID: 2446471 • Letter: 1
Question
1.Leslie manufacturing company purchased land adjacent to its factory for the installation of a holding area for equipment. Expenditures by the company were as follows: purchase price, 173,000; paving, 5,300; title search and other fees, $760; grading, 3,000; demolition of a shack on the property, 4,600; lighting, 8,200; signs, 2,850; brokers fees, 10,240; and landscaping, 10,600. Determine the amount that should be debited to the land account and record the journal entry assuming that Leslie purchased the land with cash.
2.At the beginning of a fiscal year, alexander company buys a machine for 48,000. The machine has an estimated life of 5 years and an estimated salvage value 4,000.
Using the following four methods, determine the annual depreciation of the machine for each of the estimated 5 years of its life, the accumulated depreciation at the end of each year, and the book value of the machine at the end of each year. Round annual depreciation to whole dollars.
A.straight line method
B.double declining balance method
C.units of production method (useful method is 420,000 units. Year 1 use is 120,000 units, year 2 use is 100,000 units, year 3 use is 90,000 units, year 4 use is 60,000 units and year 5 use is 50,000 units) Round calculations to 3 decimal places. Year 5 depreciation should be rounded to balance.
D.MACRS method (assume that the asset was purchased after 1986 and is 7-year property) Year 8 is depreciation should be rounded to balance.
3.During a 3 year period, 5th street motel completed the following transactions pertaining to its pickup truck:
Year 1:
Jan 11- bought a used pickup truck for cash 8,800
Nov 16- paid garage for maintenance repairs to pickup truck, 273
Dec 31- recorded the adjusting entry for depreciation. The estimated life of the pickup truck is four years, and it has an estimated trade in value of 2,200.
Dec 31- closed the expense accounts to the income summary account
Year 2:
Mar 4- paid garage for tune up and minor repairs, 88
May 27- bought a tire for the truck, 105
Dec 31- recorded the adjusting entry for depreciation for the fiscal year
Dec 31- closed the expense accounts to the income summary account
Year 3:
Feb 13- paid garage for maintenance repairs to pickup truck, 436
June 22- traded in the pickup truck for another pickup truck priced at 9,460, receiving a trade in allowance of 1,040 and paying the difference in cash. Recorded the entry to depreciate the old truck to date. Made the entry to record the exchange, assuming that the exchange has “commercial substance”.
Dec 31- recorded the adjusting entry for depreciation of the new pickup truck for the fiscal year, using the straight line method of depreciation. The estimated life of the new truck is 6 years, and it has an estimated trade in value of 2,500.
Dec 31- closed the expense accounts to the income summary account
1.record the transactions in general journal form
2. after journalizing each entry, post to the following ledger accounts, truck, no 131; accumulated depreciation, truck, no 132; truck repair expense, no 519; depreciation expense, truck, no 523; and loss on disposal of property and equipment, no 640.
Explanation / Answer
Answer 1
In accounting, all the expenses related to installation of project should be capitalised to the asset for which the same are expensed.
All the expenses, are assumed to be expensed for installation of holding area of equipment
Suppose, all the expenses are paid to only 1 vendor i.e. Mr. X
For land, Accounting entry is
Land Dr 173000
Vendor Cr 173000
Vendor Dr 173000
Cash Cr 173000
Rest all the expenses are related to installation of equipmentWill be entered in Capital WIP, so entry is
Title Dr 5300
Fees Dr 760
Grading Dr 3000
Demolition Dr 4600
Lighting Dr 8200
Signs Dr 2850
Brokerage Dr 10240
landscaping Dr 10600
Vendor Cr 45550
Vendor Dr 45550
cash Cr 45550
Equipment dr 45550
Capital WIP Cr 45550
2)
a) Straight Line Method
= (48000-4000)/5
= 8800 $
(b) Double decling Method
Incomplete Information
(c) Production based Method
d) MACRS Method
Nil value, as the asset has already depriciated
1year 2 year 3 year 4year 5 year Purchase Value 48000 39200 30400 21600 12800 Dep. 8800 8800 8800 8800 8800 Book value 39200 30400 21600 12800 4000Related Questions
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