In: Accounting
There are two parts to this problem a) & b) | ||||
A company made the following expenditures in connection with the construction of a new building: | ||||
Architect’s fees | $12,000 | |||
Cash paid for land and unusable building on the land | 300,000 | |||
Removal of old building | 18,000 | |||
Salvage from sale of old building materials | -4,000 | |||
Construction survey | 1,500 | |||
Legal fees for title search | 3,000 | |||
Excavation for basement construction | 25,000 | |||
Machinery purchased for operations | 100,000 | |||
Freight on machinery purchased | 1,600 | |||
Construction costs of new building | 1,000,000 | |||
Construction of parking lot and driveway | 33,000 | |||
Install perimeter fencing | 7,500 | |||
Installation of machinery | 2,500 | |||
a) Required: Prepare a schedule showing the amounts to be recorded as Land, Land Improvements, Buildings, and Machinery. | ||||
(See pages 355 &356 Cost Determination for how to determine) | ||||
Land | Land Improv | Buildings | Machinery | |
Architect’s fees | ||||
Cash paid for land and unusable building on the land | ||||
Removal of old building | ||||
Salvage from sale of old building materials | ||||
Construction survey | ||||
Legal fees for title search | ||||
Excavation for basement construction | ||||
Machinery purchased for operations | ||||
Freight on machinery purchased | ||||
Construction costs of new building | ||||
Construction of parking lot and driveway | ||||
Install perimeter fencing | ||||
Installation of machinery | ||||
Useful life | Indefinate | 15 years | 40 years | 10 years |
Salvage | $5,000 | $250,000 | $25,000 | |
Depreciation method | DDB | SL | DDB | |
(DDB - double declining balance, SL - straight line) | ||||
Assume that all assets are put in service on 7-1-16 | ||||
b) Required: Calculate straight line for the Building in 2016 & 2017 | ||||
Prepare depreciation schedules for the life of Land Improvements & Machinery (Round everything to a dollar) | ||||
(Straight-line is on pages 358 & 359) (Double Declining Balance is on pages 360 & 361) (Partial year depreciation - page 362) | ||||
Building | ||||
2016 | ||||
2017 | ||||
Land Improvements | ||||
2016 | ||||
2017 | ||||
2018 | ||||
2019 | ||||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
2024 | ||||
2025 | ||||
2026 | ||||
2027 | ||||
2028 | ||||
2029 | ||||
2030 | ||||
2031 | ||||
Machinery | ||||
2016 | ||||
2017 | ||||
2018 | ||||
2019 | ||||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
2024 | ||||
2025 | ||||
2026 PLEASE show how you calculated the answer so it is easier to understand, thank you! |
Depreciation Schedule of Land Improvement:
Depreciation Schedule of Machinery:
Depreciation Schedule of Building:
Here in SLM, Depreciation is calculated as = (1026500-250000)/40 = 19412.5 per year. In first year it is for 6 months so half ie. 9706.25
In DDB method Depreciation is calculated as
Example Machinery : SLM rate = (104100-25000)/10 = 7910/79100 =
10%
In DDB method rate is double so 20%, but in first year for 6 months
it is 10%. Same method for Land Improvement.