Masons Manufacturing Ltd began operations during 2015. The company had a building constructed and acquired manufacturing equipment
Question:
Mason’s Manufacturing Ltd began operations during 2015. The company had a building constructed and acquired manufacturing equipment during the first 6 months of the year. Manufacturing operations began early in July 2015. The company’s accountant, who was unsure how to treat property, plant and equipment transactions, opened a Property, Plant and Equipment account and debited (credited) that account for all the expenditures and receipts involving assets as shown on the next page (all costs are net of GST).
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. | Cost of real estate purchased: Land Old building Paid for the demolition of the old building to prepare the site for a new one. Paid for taxes in arrears on the property in (1) Paid fee for title search on property in (1) Received for sale of salvaged materials from old building Paid architect for designing new building Paid for a temporary fence around the construction site Paid excavation costs for new building Partial payment to building contractor Paid for construction of parking spaces and installation of parking area lights Paid interest on building loan during construction Made final payment to building contractor Paid for manufacturing equipment Paid freight on manufacturing equipment Paid installation costs of manufacturing equipment Paid for removal of temporary fencing around construction site Received for temporary fencing materials salvaged Paid for repair of manufacturing equipment that was damaged during installation | $ | 113 400 35 000 15 000 6 700 600 (4 600 40 000 23 300 84 000 225 000 15 700 18 000 275 000 84 000 1 600 2 900 1 300 (500 800 | ) ) | ||||
Property, Plant and Equipment account balance | $ | 937 200 | ||||||
Required
A. Prepare a schedule similar to the one below. Analyse each transaction and enter the payment (receipt) in the appropriate column. Total the columns.
Item no. | Land | Land improvements | Building | Manufacturing equipment | Other |
B. Prepare a general journal entry to close the $937 200 balance in the Property, Plant and Equipment account and allocate the transactions to their appropriate accounts.
C. Prepare an entry to record depreciation expense for half the year to 31 December 2015 on land improvements, building and manufacturing equipment using straight-line depreciation. Useful lives and residual values are:
Useful life | Residual value | |
Land improvements | 10 years | $ — |
Building | 20 years | $46 100 |
Manufacturing equipment | 8 years | 7 500 |
Step by Step Answer:
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett