Question

The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2014. 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.):

a.	Depreciation is computed from the first of the month of acquisition to the first of the month of disposition.
b.	Land A and Building A were acquired from a predecessor corporation. Thompson paid $762,500 for the land and building together. At the time of acquisition, the land had a fair value of $68,000 and the building had a fair value of $782,000.
c.	Land B was acquired on October 2, 2014, in exchange for 2,500 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 $20 per share. During October 2014, Thompson paid $9,900 to demolish an existing building on this land so it could construct a new building.
d.	Construction of Building B on the newly acquired land began on October 1, 2015. By September 30, 2016, Thompson had paid $160,000 of the estimated total construction costs of $250,000. Estimated completion and occupancy are July 2017.
e.	Certain equipment was donated to the corporation by the city. An independent appraisal of the equipment when donated placed the fair value at $14,000 and the residual value at $1,500.
f.	Machine A’s total cost of $110,000 includes installation charges of $500 and normal repairs and maintenance of $10,500. Residual value is estimated at $4,900. Machine A was sold on February 1, 2016.
g.	On October 1, 2015, Machine B was acquired with a down payment of $3,500 and the remaining payments to be made in 10 annual installments of $3,500 each beginning October 1, 2016. The prevailing interest rate was 8%.

Required:

Supply the correct amount for each answer box on the schedule.

THOMPSON CORPORATION

Fixed Asset and Depreciation Schedule

For Fiscal Years Ended September 30, 2015, and September 30, 2016

Assets

Acquisition Date

Cost

Residual

Depreciation Method

Estimated Life in Years

Depreciation for Year Ended 9/30

2015

2016

Land A

10/1/14

$762,500

N/A

N/A

N/A

N/A

N/A

Building A

10/1/14

782,000

$53,500

SL

$13,500

Land B

10/2/14

850,000

N/A

N/A

N/A

N/A

N/A

Building B

Under construction

160000 to date

—

SL

30

—

Donated Equipment

10/2/14

14,000

1,500

150% Declining balance

10

Machine A

10/2/14

4,900

Sum-of-the years’-digits

10

Machine B

10/1/15

—

SL

15

—

Answer 1

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Working for Event b
	Appraised Value	Ratio	Allocated Value 762500*% Ratio
Land A	$                                   68,000	8%	$                                                  61,000
Building A	$                                 782,000	92%	$                                                701,500
Total	$                                 850,000	100%	$                                                762,500
Salvage Value of Building A	$                                   53,500	Given
Depreciable Value 701500-53500	$                                 648,000
Depreciation for 2015	$                                   13,500
Life 648000/13500	$                                            48
Depreciation for 2016	$                                   13,500		Since SLM, will be same for every year
Working for Event c
Cost of Land B
(No of Share* Fair Value)	2500*20	$         50,000
add: Demolition Cost		$            9,900
Cost of Land B		$         59,900
Working for Event d
Depreciation for 2015 and 2016 will be NIL as usages is yet to commence
Working for Event e
Cost of donated equipment	Fair value	$         14,000
Depreciation for 2015	(14000*10%)*150%	$            2,100
Depreciation for 2016	(14000-2100)*10%*150%	$            1,785
Working for Event f
Cost of Machine A	110000-10500	$         99,500
Depreciation for 2015	(99500-4900)*10/45	$         21,022
(Life 10 Year, Sum of 1to10=45)
Depreciation for 2016	(99500-4900)*9/45*4/12	$            6,307
(4 Month as sold in Feb)
Working for Event g
Cost of Machine B:
Down Payment		$            3,500
PV of 3500 (PV 8%, 10 Year)	3500*6.71008 (Working-1)	$         23,485
Cost of Machine B		$         26,985
Depreciation 2015 and 2016	26985/15	$            1,799
Working (Since installment is started at beginning of the year	8%
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	6.71008
	2015 Dep	2016 Dep
Land A	NA	NA
Land B	NA	NA
Building A	$                                   13,500	$         13,500
Building B	0	0
Machine A	$                                   21,022	$            6,307
Machine B	$                                      1,799	$            1,799
Donated Equipment	$                                      2,100	$            1,785