Question

The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2019. The accounting department of Thompson 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: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

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. Thompson paid $772,500 for the land and building together. At the time of acquisition, the land had a fair value of $103,200 and the building had a fair value of $756,800.
3. Land B was acquired on October 2, 2019, in exchange for 2,600 newly issued shares of Thompson’s common stock. At the date of acquisition, the stock had a par value of $5 per share and a fair value of $21 per share. During October 2019, Thompson paid $10,000 to demolish an existing building on this land so it could construct a new building.
4. Construction of Building B on the newly acquired land began on October 1, 2020. By September 30, 2021, Thompson had paid $170,000 of the estimated total construction costs of $260,000. Estimated completion and occupancy are July 2022.
5. Certain equipment was donated to the corporation by the city. An independent appraisal of the equipment when donated placed the fair value at $14,400 and the residual value at $1,600.
6. Equipment A’s total cost of $102,000 includes installation charges of $510 and normal repairs and maintenance of $10,600. Residual value is estimated at $5,000. Equipment A was sold on February 1, 2021.
7. On October 1, 2020, Equipment B was acquired with a down payment of $3,600 and the remaining payments to be made in 10 annual installments of $3,600 each beginning October 1, 2021. The prevailing interest rate was 7%.

Required:
Supply the correct amount for each answer box on the schedule. (Round your intermediate calculations and final answers to the nearest whole dollar.)

THOMPSON CORPORATION Fixed Asset and Depreciation Schedule For Fiscal Years Ended September 30, 2020, and September 30, 2021 Assets Acquisition Date Cost Residual Depreciation Method Estimated Life in Years Depreciation for Year Ended 9/30 2020 2021 Land A 10/1/2019 N/A not applicable N/A N/A N/A Building A 10/1/2019 $40,600 Straight-line $13,600 Land B 10/2/2019 N/A not applicable N/A N/A N/A Building B Under construction 170,000 to date — Straight-line 30 — Donated Equipment 10/2/2019 1,600 200% Declining balance 10 Equipment A 10/2/2019 5,000 Sum-of-the years’-digits 9 Equipment B 10/1/2020 — Straight-line 16 —

Answer 1

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Ans :

THOMPSON CORPORATION
Fixed Asset and Depreciation Schedule
For Fiscal Years Ended September 30, 2020, and September 30, 2021
Assets	Acquisition Date	Cost	Residual	Depreciation Method	Estimated Life in Years	Depreciation for Year Ended 9/30
2020	2021
Land A	10/1/2019	$103,200	N/A	N/A	N/A	N/A	N/A
Building A	10/1/2019	$     756,800	$ 40,600	Straight-line		$14,300	$14,300
Land B	10/2/2019	$ 64600	N/A	not applicable	N/A	N/A	N/A
Building B	Under construction	170,000 to date	—	Straight-line	30	—	-
Donated Equipment	10/2/2019	$ 14400	1,600	200% Declining balance	10	$ 2880	$ 2304
Equipment A	10/2/2019		5,000	Sum-of-the years’-digits	8	$ 17280	$ 5120
Equipment B	10/1/2020		—	Straight-line	16	—	$ 1805

Working Notes
	Appraised Value	Ratio	Allocated Value $772,500*% Ratio
Land A	$      103,200	12%	$        92,700
Building A	$     756,800	88%	$        679,800
Total	$     860,000	100%	$     772,500
Salvage Value of Building A	$ 40,600	Given
Depreciable Value	$ 716,200	A
Depreciation for 2020	$   14,300	b
Life	$       50	a/b
Depreciation for 2021	$      14,300		Since SLM, will be same for every year

Land B = 2600 shares * $21 + $ 10000 = $ 64600

Building B is under construction , so nor depreciation will be charged

Donated Equipment

Fair value                    $14,400 ( so this becomes the cost )

Less : Residual value   1600

Depreciable amt        12800

Depreciation rate = 200 % declining method

Life = 10 yrs , so rate of dep will be 10 %

Double Rate = 10% * 2 = 20%

Depreciation for 2020 = 14400 * 20% = 2880

Depreciation for 2021 = ( 14400 – 2880 ) * 20% = 2304

Equipment A’s total cost of $102,000

Less : Normal repairs           $ 10600

Capitalized value                   $ 91400

Less : residual value          $ 5000

Depreciable amt                 $ 86400

Sum of yrs digit method = 9 : 8 : 7 : 6 : 5 : 4 : 3: 2: 1 = 45

Depreciation for 2020 = 86400 * 9 / 45 = 17280

Depreciation for 2021 = 86400 * 8 / 45 * 4 / 12 = 5120 ( Dep from oct to jan , since asset is sold on 1/2/2021)

Equipment B

year	Annual lease	Discount factor 7 %	P.V. of lease
0	3600	1	3600
1	3600	0.9346	3364.486
2	3600	0.8734	3144.379
3	3600	0.8163	2938.672
4	3600	0.7629	2746.423
5	3600	0.7130	2566.75
6	3600	0.6663	2398.832
7	3600	0.6227	2241.899
8	3600	0.5820	2095.233
9	3600	0.5439	1958.161
10	3600	0.5083	1830.057
		Total	28884.89
		Approx	28885

Depreciation ( straight line ) = 16 yrs

Annual depreciation = 28885 / 16 = $ 1805