Question: In 2009 Nicola Corporation acquired several PP E assets for its

In 2009, Nicola Corporation acquired several PP&E assets for its manufacturing operations. Following are descriptions of costs incurred by Nicola during 2009 related to these assets. All amounts were paid in cash.
• On January 2, Nicola purchased land with a warehouse for $2,600,000. The land’s appraised value was $700,000, whereas the warehouse had an appraised value of $2,100,000. The warehouse has an estimated useful life of 20 years and estimated salvage value of $200,000.
• On January 3, Nicola purchased production equipment for $1,000,000 that had an estimated useful life of five years and an estimated salvage value of $60,000. The equipment was shipped FOB destination by the seller to Nicola’s place of business at a cost of $4,200.
• The equipment purchased on January 3 was damaged during installation. The total repair cost was $2,700.
• On April 2, Nicola purchased office furniture and fixtures for $400,000. These assets have an estimated useful life of ten years and an estimated salvage value of $30,000.
• On July 1, Nicola purchased four delivery trucks at a cost of $12,000 each. Each truck had an estimated useful life of four years and anestimatedsalvagevalueof$2,400.Expenses paid to deliver the trucks to Nicola’s business location totaled $900, and insurance paid on the trucks while they were in transit amounted to $300. Nicola immediately installed an alarm system on each truck at a cost of $600 per truck.
(a) Prepare the journal entries to record the acquisitions of PP&E assets by Nicola Corporation during 2009.
(b) Nicola records straight-line depreciation on its PP&E assets each December 31. Prepare the December 31, 2009, adjusting entries for depreciation expense on the assets acquired during 2009.

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  • CreatedMarch 27, 2015
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