On January 1, 2019 Stuff Inc. acquired land with a very old building on it to...

  

Transcribed Image Text:

On January 1, 2019 Stuff Inc. acquired land with a very old building on it to build a new plant. They made a $25,000 down payment and signed a non-interest bearing note for $300,000 that is due with 2 instalment payments of $150,000 each at the end of the next 2 years. An interest rate of 10% is implicit in the purchase price. On January 1, 2019 they paid their lawyer $1,300 to perform a title search on the property. On January 15, 2019 they paid a local demolition crew $12,000 to demolish the existing building. Stuff Inc. was able to recover $5,800 from materials salvaged. They began construction on February 1, 2019 and construction was completed by August 1, 2019. They had everything ready to start operations on August 1, 2019. On March 1, 2019 Machinery was purchased for $95,000 to manufacture "stuff". The Machinery was purchased with discount terms 2/10 n 30. There was an additional delivery fee of $500. On January 20, the Municipality paid Stuff Inc. a grant of $25,000 to help with the construction. The company also paid for the following additional expenditures during the year: Landscaping, trees and shrubs (assume permanent in nature) Storage costs (due to construction not completed as scheduled) • • . Machinery assembly and installation (on July 31) Building construction costs Interest costs for 2019 fiscal year covering period February 1 to Dec 31 (construction loan signed on February 1, 2019) • Insurance coverage for the building relating to a 18-month period (Insurance coverage started and paid for on February 1, 2019) Architects fees to help with the design of the building . 18,750 3,700 3,600 515,000 10,620 4,880 5,950 Required: 1. Prepare a spreadsheet with following columns. Assume company follows IFRS. LAND BUILDING MACHINE OTHER DESCRIPTION Determine the amounts that should be included in the Land, Building, and Machinery accounts. If the cost does not fall under one of these accounts, indicate the account it should be debited to in the "other" category. Show calculations. (19 marks) 2. Assume on January 1, 2021 they decided to trade their Machine for a NEW machine. As part of this trade, the company (Stuff Inc.) also paid $10,600 in cash. Assume that the old machine had a market value of $58,000 on January 1, 2021 (the date of the trade). The NEW machine has a market value of $68,650. Double declining balance Depreciation method was used for the old machine assuming an original useful life of 5 years. Show all calculations including Depreciation of the old machine, Prepare the journal entry on January 1, 2021 to record the trade (6 marks) On January 1, 2019 Stuff Inc. acquired land with a very old building on it to build a new plant. They made a $25,000 down payment and signed a non-interest bearing note for $300,000 that is due with 2 instalment payments of $150,000 each at the end of the next 2 years. An interest rate of 10% is implicit in the purchase price. On January 1, 2019 they paid their lawyer $1,300 to perform a title search on the property. On January 15, 2019 they paid a local demolition crew $12,000 to demolish the existing building. Stuff Inc. was able to recover $5,800 from materials salvaged. They began construction on February 1, 2019 and construction was completed by August 1, 2019. They had everything ready to start operations on August 1, 2019. On March 1, 2019 Machinery was purchased for $95,000 to manufacture "stuff". The Machinery was purchased with discount terms 2/10 n 30. There was an additional delivery fee of $500. On January 20, the Municipality paid Stuff Inc. a grant of $25,000 to help with the construction. The company also paid for the following additional expenditures during the year: Landscaping, trees and shrubs (assume permanent in nature) Storage costs (due to construction not completed as scheduled) • • . Machinery assembly and installation (on July 31) Building construction costs Interest costs for 2019 fiscal year covering period February 1 to Dec 31 (construction loan signed on February 1, 2019) • Insurance coverage for the building relating to a 18-month period (Insurance coverage started and paid for on February 1, 2019) Architects fees to help with the design of the building . 18,750 3,700 3,600 515,000 10,620 4,880 5,950 Required: 1. Prepare a spreadsheet with following columns. Assume company follows IFRS. LAND BUILDING MACHINE OTHER DESCRIPTION Determine the amounts that should be included in the Land, Building, and Machinery accounts. If the cost does not fall under one of these accounts, indicate the account it should be debited to in the "other" category. Show calculations. (19 marks) 2. Assume on January 1, 2021 they decided to trade their Machine for a NEW machine. As part of this trade, the company (Stuff Inc.) also paid $10,600 in cash. Assume that the old machine had a market value of $58,000 on January 1, 2021 (the date of the trade). The NEW machine has a market value of $68,650. Double declining balance Depreciation method was used for the old machine assuming an original useful life of 5 years. Show all calculations including Depreciation of the old machine, Prepare the journal entry on January 1, 2021 to record the trade (6 marks)

Answer rating: 100% (QA)

Step 1 of 4 1 Spreadsheet Determining amounts to be included in Land Building and Machinery Particul... View the full answer