# On April 1, 2015, KD Candies, Ltd. purchased a candy factory, including a building, computer system, and equipment for \$550,000.

## Question:

On April 1, 2015, KD Candies, Ltd. purchased a candy factory, including a building, computer system, and equipment for \$550,000. KD Candies hired an appraiser to provide the appraisal value for each asset: building \$350,000, computer system \$150,000, and equipment \$125,000. To prepare the factory for use in production, KD Candies spent \$30,000 to renovate the factory facilities, \$23,000 to upgrade the computer system, and \$25,000 to upgrade the equipment. The following table shows the estimates and the method of depreciation for each of the assets:

The machine was used 3,800 hours in 2015 and 5,200 hours in 2016.
KD Candies had several transactions related to maintaining and upgrading the assets. On July 1, 2016, KD Candies spent \$6,500 to upgrade the computer system, and on January 5, 2017, KD Candies spent \$13,200 to upgrade the equipment. As a result, the total remaining machine hours were estimated at 20,000 hours. The machine was used 6,500 hours. On January 2, 2018, KD Candies sold the factory for \$350,000.
Requirements
1. Apportion the cost of the factory on the basis of the appraisal value. Show your calculations.
2. Calculate the depreciation expense for each asset for 2015, 2016, and 2017:

3. Record all journal entries for 2015, 2016, and 2017. KD Candies' year-end is December 31.
4. Record the sale of the factory on January 2, 2018.

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## Financial Accounting

ISBN: 978-0133375534