Question: On March 1 Taikin Manufacturing Ltd purchased a factory with

On March 1, Taikin Manufacturing Ltd. purchased a factory with a lot of land and a machine for $818,000. Taikin paid legal fees of $2,000 for this purchase, renovation costs on the building of $27,000, and the $8,000 cost of overhauling the machine. The appraisal value for the land was $225,000, for the building was $585,000, and for the machine was $90,000. Taikin estimated that the building’s useful life was 15 years with a residual value of $20,000 and the machine’s production hours would be 43,000 machine hours, with a residual value of $4,000. Taikin uses the straight-line method to depreciate buildings and the units-of-production method to depreciate machines. Taikin’s year-end is December 31. Taikin used the machine 3,600 hours for the first year and 4,500 hours for the second year.
1. Apportion the cost of the factory on the basis of the appraised value. Show your calculations.
2. Record the journal entry for the purchase of the building, land, and machine.
3. Record the adjusting entry for the depreciation for the first year.
4. What would be the carrying value of each asset at the end of the first year and the second year?

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  • CreatedJuly 08, 2015
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