Buch Corporation purchased Machine Z at the beginning of Year 1 at a cost of $100,000. The

Question:

Buch Corporation purchased Machine Z at the beginning of Year 1 at a cost of $100,000. The machine is used in the production of Product X. The machine is expected to have a useful life of 10 years and no residual value. The straight-line method of depreciation is used. Adverse economic conditions develop in Year 3 that result in a significant decline in demand for Product X. At December 31, Year 3, the company develops the following estimates related to Machine Z:

Expected future cash flows …………………………………. $75,000

Present value of expected future cash flows ……… 55,000

Selling price …………………………………………………. 70,000

Costs of disposal ……………………………………………. 7,000

At the end of Year 5, Buch's management determines that there has been a substantial improvement in economic conditions, resulting in a strengthening of demand for Product Z. The following estimates related to Machine Z are developed at December 31, Year 5:

Expected future cash flows ……………………………… $70,000

Present value of expected future cash flows ……………. 53,000

Selling price …………………………………………….. 50,000

Costs of disposal ……………………………………….. 7,000

Required:

Determine the carrying amounts for Machine Z to be reported on the balance sheet at the end of Years 1-5, and the amounts to be reported in the income statement related to Machine Z for Years 1-5. 27. On January 1, Year 1, Holzer Company hired a general contractor to begin construction of a new office building. Holzer negotiated a $900,000, five-year, 10 percent loan on January 1, Year 1, to finance construction. Payments made to the general contractor for the building during Year 1 amount to $1,000,000. Payments were made evenly throughout the year. Construction is completed at the end of Year 1, and Holzer moves in and begins using the building on January 1, Year 2. The building is estimated to have a 40-year life and no residual value. On December 31, Year 3, Holzer Company determines that the market value for the building is $970,000.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...