The JHP Company purchased a building, some office equipment, two cranes, and some land on January 1,
Question:
The JHP Company purchased a building, some office equipment, two cranes, and some land on January 1, 2011, for a total of $1 million cash. JHP has obtained the following appraisals of these assets:
JHP Company uses the straight-line method to depreciate fixed assets.REQUIRED:a. Prepare the journal entry to record the purchase.b. Prepare the journal entry to record depreciation expense for each type of asset for the year ended December 31, 2011.c. Assuming that all of these assets are still held as of December 31, 2012, present these fixed assets as they would be shown on the December 31, 2012, balance sheet.
Estimated Asset FMV on 1/1/11 Salvage Value Estimated Life Building Office equipment 20 years 3 years S300,000 1 S75,000 75,000 75,000 600,000 Crane Crane Land 15,000 15,000 5 years Indefinite
Step by Step Answer:
a 1111 Relative Purchase Cost Asset FMV FMV x Price Allocation Building 300000 3001200 1000000 25000...View the full answer
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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