Question

Problem 11-10

Skysong Corporation, a manufacturer of steel products, began operations on October 1, 2016. The accounting department of Skysong 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. Skysong paid $844,000 for the land and building together. At the time of acquisition, the land had an appraised value of $86,100, and the building had an appraised value of $774,900.
3.		Land B was acquired on October 2, 2016, in exchange for 2,600 newly issued shares of Skysong’s common stock. At the date of acquisition, the stock had a par value of $5 per share and a fair value of $28 per share. During October 2016, Skysong paid $15,300 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, 2017. By September 30, 2018, Skysong had paid $307,000 of the estimated total construction costs of $428,900. It is estimated that the building will be completed and occupied by July 2019.
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 $38,900 and the salvage value at $2,700.
6.		Machinery A’s total cost of $181,800 includes installation expense of $540 and normal repairs and maintenance of $14,400. Salvage value is estimated at $6,500. Machinery A was sold on February 1, 2018.
7.		On October 1, 2017, Machinery B was acquired with a down payment of $5,280 and the remaining payments to be made in 11 annual installments of $5,540 each beginning October 1, 2017. The prevailing interest rate was 8%. The following data were abstracted from present value tables (rounded).

Present value of $1.00 at 8%				Present value of an ordinary annuity of $1.00 at 8%
10 years		0.463		10 years		6.710
11 years		0.429		11 years		7.139
15 years		0.315		15 years		8.559

Complete the schedule below. (Round answers to 0 decimal places, e.g. 45,892.)

SKYSONG CORPORATION

Fixed-Asset and Depreciation Schedule

For Fiscal Years Ended September 30, 2017, and September 30, 2018

						Depreciation Year Ended	Expense September 30
Assets	Acquistion Date	Cost	Salvage	Salavage Deprectiaion Method	Estimated Life in Years	2017	2018
Land A	October 1, 2016	1.________	N/A	N/A	N/A	N/A	N/A
Building A	October 1, 2016	2.________	$43,400	Straight-line	3.________	$14,616	4._______
Land B	October 2, 2016	5.________	N/A	N/A	N/A	N/A	N/A
Building B	Under Construction	$307,000 to date	_	Straight-line	30	__	6.______
Donated Equipment	October 2, 2016	7._______	2,700	150 % declining-balance	10	8.________	9,_______
Machinery A	October 2, 2016	10.______	6,500	Sum-of-the-years'-digits	8	11._______	12.______
Machinery B	October 1, 2017	13.______	__	Straight-line	20	___	14.______

Answer 1

								Depreciation	Expense
								Year Ended	30-Sep			757900
		Assets	Acquistion Date	Cost	Salvage	Salavage Deprectiaion Method	Estimated Life in Years	2017	2018
		Land A	1-Oct-16	1.$86100	N/A	N/A	N/A	N/A	N/A
		Building A	1-Oct-16	2.$774900	$43,400	Straight-line	50	$14,616	4.$10962
		Land B	2-Oct-16	5.$88100	N/A	N/A	N/A	N/A	N/A
		Building B	Under Construction	$307000 to date	_	Straight-line	30	$0	6.$0
		Donated Equipment	2-Oct-16	7.$38900	2,700	150 % declining-balance	10	8.$5616	9,$3580
		Machinery A	2-Oct-16	10.$167400	6,500	Sum-of-the-years'-digits	8	11.$31286	12.$2235
		Machinery B	1-Oct-17	13.47993	$0	Straight-line	20	$600	14.$1800
		Cost of Building A	$                774,900
		Depreciation of Building A in 2017	$14,616
		Life of Building A in years	50	(774900-43400)/14616
		Expense Septer 30, 2018	10962	(14616*(9/12)
		Cost acquisition of Land B	$                  72,800	($28*26000
		Cost of demolition of existing building	$15,300
		Capital cost of the land B	$                  88,100	(72800+15300)
		There is no depreciation of Building B
		Depreciation will start only after completion and being put to use of asset
		Donated Equipment:
		Life of Equipment in years	10
		Straight line rate =(1/10)	10%
		Rate for 150% declining balance	15%	(1.5*10)
		Cost of Donated equipment	$38,900
		Depreciation in Year 2016	$                     1,459	38900*0.15*(3/12)
		Book value at end of year 2016	$37,441	(38900-1459)
		Depreciation in Year 2017	$5,616	(37441*0.15)
		Book value at end of year 2017	$31,825	(37441-5616)
		Depreciation in Year 2018 till Sep 30	$                     3,580	(31825*0.15*(9/12)
		MACHINERY A
		Normal Repair and maintenance costs are expensesd and not depreciated
		Cost of machinery A	$181,800
		Less:Normal Repair and maintenance	$14,400
		Depreciable asset	$167,400	(181800-14400)
		Salvage value	$6,500
		Amount to be expensed over useful life	$160,900	(167400-6500)
		Useful Life in Years	8
		SUM OF DIGITS=1+2+3+4+5+6+7+8=	36
		Depreciation in year 1=(8/36)*160900	$35,756
		Depreciation in 2016	$8,938.89	(3/12)*35756
		Depreciation in 2017	$31,286	(7/36)*160900)
		Depreciation in 2018	$26,817	(6/36)*160900
		Since it is sold on Feb 1, Depreciation Sep 30,2018	$2,235	(26817/12)
		COST OF MACHINERY B
		Down Payment	$5,280
		October 1 Instalment	$5,540
		Present value of remaining110annual instalment at 8%	$                  37,173	(6.71*5540)
		Total Cost of equipment on October 1 , 2017	$47,993
		Annual Depreciation=47993/20	$2,400
		2017 Depreciation=(3/12)*2400	$600
		Depreciation till Sep30,2018=(9/12)*2400	$1,800