On July 1, 2015, Park and Kim, Ltd. purchased a factory, including factory building, land, machine, and fixtures, for $825,000. Park and Kim hired an appraiser to provide the appraisal value for each asset: building $600,000, land $120,000, machine $420,000, and fixtures $60,000. To prepare the factory for use in production, Park and Kim spent $21,250 to renovate the factory building and $5,250 to overhaul the machine. The following table shows the estimates and the method of depreciation for each of the assets:

The machine was used 2,000 hours in 2015 and 3,000 hours in 2016.
Park and Kim had several transactions related to maintaining and upgrading the assets. On April 15, 2016, Park and Kim spent $1,200 to repair the fixtures, and on January 5, 2017, Park and Kim spent $49,500 to overhaul the engine. As a result, the total remaining machine hours were estimated at 21,000 hours. The machine was used 2,400 hours in 2017.
On January 2, 2018, Park and Kim sold the factory for $785,000.
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. Park and Kim's year-end is
December 31.
4. Record the sale of the factory on January 2, 2018.

Transcribed Image Text:

Method Straight-Line Unit-of-Production Double-Declining Residual Value Life Building Machine Fixtures 15 years 20,000 hours $13,750 10,000 5 years 6,250 Building Machine Fixtures 2015 2016 2017 Total