CHAPTER $10$ IN$-$CLASS ACTIVITY PROPERTY, PLANT AND EQUIPMENT $[18$ POINTS$]$

BACKGROUND: Sony Group Corporation $($SONY$)$ is a multinational conglomerate operating in the following industries: electronics, video games, music and film. Assume SONY purchased a new facility to grow its small electronic business, including cameras, DVD players and Blu$-$Ray players in early January $20$ Y $5.$

$-$ The cash purchase price of $\backslash (\backslash$$ $7\mathrm{.}5\backslash$mathrm$\{$M$\}\backslash )$ included $6$ acres of land and an existing building. According to independent appraisals at the time of purchase, the fair value of the building was $\backslash (\backslash$$ $6\mathrm{.}4\backslash$mathrm$\{$M$\}\backslash )$ and the fair value of the land was $\backslash (\backslash$$ $1\mathrm{.}6\backslash$mathrm$\{$M$\}\backslash ).$

$-$ SONY will depreciate the building over $30$ years using the straight$-$line method. Estimated salvage value is $\backslash (\backslash$$ $420,000\backslash ).$

$-$ Cash paid for general building maintenance during the first three years is as follows: $\backslash (\backslash$$ $60,000\backslash )$ during $\backslash (20\backslash$mathrm$\{$Y$\}5,\backslash$$ $64,000\backslash )$ during $20$Y$6,$ and $\backslash (\backslash$$ $72,000\backslash )$ during $20$ Y $7.$

$-$ In early January $20$Y$6,$ SONY spent $\backslash (\backslash$$ $1,247,000\backslash )$ on factory renovations to make future operations more efficient.

$-$ In early January $20$Y$7,$ SONY's auditors suggested that the book value of the factory building might be impaired due to a growing decline in the demand for products manufactured at the factory. Management estimated that net future cash flows over the factory's remaining useful life would be approximately $\backslash (\backslash$$ $6\mathrm{.}2\backslash$mathrm$\{$M$\}\backslash ).$ An updated independent appraisal showed that the factory's fair value had declined to $\backslash (\backslash$$ $5,672,000\backslash ).$ SONY decided to continue to use the factory rather than sell it and as a result, revised the factory's estimated salvage value to $\backslash (\backslash$$ $240,000\backslash ).$

REQUIRED:

$1.$ Record the entries related to the above transactions from $20$ Y $5$ to $20$ Y $7.$

$2.$ Show the impacts of the above transactions on SONY's financial statements for $20$ Y $5$ to $\backslash (\backslash$mathbf$\{20$ Y $7\}\backslash ).$ Check figures have been provided. IMPACT ON CURRENT PERIOD CASH FLOW

For Property, Plant, or Equipment

IMPACT ON CURRENT PERIOD EARNINGS

$\backslash (20$ Y $5\backslash )$

Net Impact on Current Period Cash Flow

Net Impact on Current Period Earnings

CUMULATIVE IMPACT ON BALANCE SHEET ELEMENTS

ASSETS:

Cash

Factory Building, Net

Cumulative Change in Assets $20$ Y $5$

$\backslash (20$ Y $6\backslash )$

$\backslash (20$ Y $7\backslash )(\backslash$$$1,965,000)$

LIABILITIES $+$ EQUITY:

Cumulative Change in Liabilities $+$ Equity $\backslash ((\backslash$$ $246,000)\backslash )(\backslash$$$1,965,000)$