Your examination of the records of Wilson Ltd, which was established on 1 March 2015, reveals that the accountant debited the Land, Buildings and Equipment account with the following items (ignore GST):

Examination of the wage records shows that the salary of the manager, $4000 per month, was debited to the Salaries Expense account. From 1 March to 31 August 2015, he supervised the erection of the factory buildings, and from 1 September to 31 October 2015 he supervised the installation of the machinery.

 The accountant credited sundry income with $8400, being $7000 received for scrap building material from the demolished building and $1400 for the damaged machine.

Required

A. Show journal entries to transfer the amounts to three different accounts, i.e. Land account, Buildings account and Machinery account.

B. Assuming that the enterprise started operations on 1 November 2015 and that its financial year ends on 31 March, journalise the following depreciation entries using the straight-line method:

1.   buildings: useful life 40 years, $20 000 residual value

2.   machinery: useful life 12 years and residual value amounting to 10% of cost.

Transcribed Image Text:

Purchase price of land and building 650 000 (An independent valuation was obtained, showing land being valued at $600 000 and the building at $80 000) Legal and transfer costs Cost of demolition of building Earthmoving on property Architect's and other professional fees in respect of the erection of new buildings on the property Cost of erection of new building Layout of parking area Lighting of parking area Cost of machinery and equipment (including $9000 for a machine which was dropped from one of the company's vehicles during off-loading and irreparably damaged) Installation cost of machinery Cost of replacement of damaged machine 3 500 25 000 15 000 160 000 2 100 000 75 000 18 000 1 267 000 85 000 9 000 4 407 500 %24