Sheffield Corporation, a manufacturer of steel products, began operations on Oct

Question

Sheffield Corporation, a manufacturer of steel products, began operations on October 1, 2016. The accounting department of Sheffield has started the fixed-asset and depreciation schedule presented below. You have been asked to assist in completing this schedule. In addition to ascertaining that the data already on the schedule are correct, you have obtained the following information from the company's records and personnel 1. Depreciation is computed from the first of the month of acquisition to the first of the month of disposition 2. Land A and Building A were acquired from a predecessor corporation. Sheffield paid $829,600 for the land and building together. At the time of acquisition, the land had an appraised value of $88,400, and the building had an appraised value of $795,600 3. Land B was acquired on October 2, 2016, in exchange for 2,700 newly issued shares of Sheffield's common stock. At the date of acquisition, the stock had a par value of $5 per share and a fair value of $32 per share. During October 2016, Sheffield paid $16,900 to demolish an existing building on this land so it could construct a new 4. Construction of Building B on the newly acquired land began on October 1, 2017. By September 30, 2018, Sheffield had paid $312,200 of the estimated total 5. Certain equipment was donated to the corporation by a local university. An independent appraisal of the equipment when donated placed the fair value at $41,400 and 6. Machinery A's total cost of $178,900 includes installation expense of $650 and normal repairs and maintenance of $16,400. Salvage value is estimated at $6,200 7. On October 1, 2017, Machinery B was acquired with a down payment of $6,160 and the remaining payments to be made in 11 annual installments of $6,420 each building construction costs of $470,800. It is estimated that the building will be completed and occupied by July 2019 theage value at $2,700 Machinery A was sold on February 1, 2018 beginning October 1, 2017. The prevailing interest rate was 8%. The following data were abstracted from present value tables (rounded) Present value of an ordinary annuity of $1.00 at 890 Present value of $1.00 at 8% 10 years 0.463 11 years 0.429 15 years0.315 10 years 11 years 15 years 6.710 7.139 8.559

Explanation / Answer

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Working for Event 2 Appraised Value Ratio Allocated Value 829600*% Ratio Part No Land A 88400 10 82960 1 Building A 795600 90 746640 2 Total 884000 100 829600 Salvage Value of Building A 43200 Given Depreciable Value 746640-43200 703440 Depreciation for 2017 14967 Life 703440/14967                                                47 3 Depreciation for 2018 14967 Since SLM, will be same for every year 4 Working for Event 3 Cost of Land B (No of Share* Fair Value) 2700*32 86400 add: Demolition Cost 16900 Cost of Land B 103300 5 Working for Event 4 Depreciation for 2018 will be NIL as usages is yet to commence 6 Working for Event 5 Cost of donated equipment Fair value 41400 7 Depreciation for 2017 (41400*10%)*150% 6210 8 Depreciation for 2018 (41400-6210)*10%*150% 5279 8 Working for Event 6 Cost of Machine A 178900-16400 162500 10 Depreciation for 2017 (162500-6200)*8/36 34733 11 (Life 8 Year, Sum of 1to8=36) Depreciation for 2018 (162500-6200)*7/36*4/12 10131 12 (4 Month as sold in Feb) Working for Event 7 Cost of Machine B: Down Payment 6160 PV of 6420 (PV 8%, 11 Year) 6420*7.7101 (Working-1) 49499 Cost of Machine B 55659 13 Depreciation 2018 55659/20 2783 14 Working (Since installment is started at beginning of the year 8% 0                                     1.00000 1                                     0.92593 2                                     0.85734 3                                     0.79383 4                                     0.73503 5                                     0.68058 6                                     0.63017 7                                     0.58349 8                                     0.54027 9                                     0.50025 10                                     0.46319 Total                                     7.71008

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