On 2 January 2015, Powerhouse Ltd purchased, by exchanging $300 000 cash and a $180 000, 12%,
Question:
On 2 January 2015, Powerhouse Ltd purchased, by exchanging $300 000 cash and a $180 000, 12%, 18-month finance company loan, assets with the following independently determined appraised values:
Appraised value | |||
Building Land Machinery and equipment | $ | 320 000 80 000 100 000 | |
$ | 500 000 |
The estimated useful life of the building is 30 years and its residual value is $20000.
The $100 000 machinery and equipment amount consists of three machines independently valued at $30 000 each and some office equipment valued at $10 000. The estimated useful lives and residual values for these assets are:
Useful life | Residual value | ||
Machine 1 Machine 2 Machine 3 Office equipment | 6 years 9 years 4 years 5 years | $3 000 3 000 4 000 500 |
Powerhouse Ltd uses the straight-line depreciation method. Ignore GST.
Required
A. Prepare journal entries(in general journal form) to record:
1. The purchase of the assets
2. The accrual of interest expense on the loan on 31 December 2015.
3 .Depreciation expense for the year 2015.
4. The payment of the loan on 2 July 2016.
B. Show how the assets would be reported on the 31 December 2015 balance sheet.
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