Question

ID Watchdog Inc. recently negotiated a lump-sum purchase of several assets from a contractor who was planning to change locations. The purchase was completed on September 30, 2014, at a total cash price of $1,044,000, and included a building, land, certain land improvements, and a heavy general purpose truck. The estimated market values of the assets were: building, $663,300; land, $397,980; land improvements, $120,600; and truck, $24,120. The company’s fiscal year ends on December 31.

Required
1. Prepare a schedule to allocate the lump-sum purchase price to the separate assets that were purchased. Also present the journal entry to record the purchase.
2. Calculate the 2014 depreciation expense on the building using the straight-line method to the nearest whole month, assuming a 15-year life and a $45,000 residual value.
3. Calculate the 2014 depreciation expense on the land improvements assuming an eight-year life, $36,000 residual and double-declining-balance depreciation to the nearest whole month (round calculations to the nearest whole dollar).


Show the depreciation for each year (calculated to the nearest whole month) and the total depreciation for the machine under each depreciation method. For units-of-production, round the depreciation charge per unit to two decimal places. The company’s year-end is December31.


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  • CreatedJanuary 08, 2015
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