Question

Problem 11-5 (Static) Property, plant, and equipment and intangible assets; comprehensive [LO11-2] The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2019. The accounting department of Thompson has started the fixed-asset and depreciation schedule presented below. You have been asked to assist in completing this schedule. In addition to ascertaining that the data already on the schedule are correct, you have obtained the following information from the company's records and personnel: (FV of $1. PV of S1, FVA of 51. PVA of $1. FVAD of S1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): a. Depreciation is computed from the first of the month of acquisition to the first of the month of disposition. b. Land A and Building A were acquired from a predecessor corporation. Thompson paid $812,500 for the land and building together At the time of acquisition, the land had a fair value of $72.000 and the building had a fair value of $828,000. c. Land B was acquired on October 2, 2019, in exchange for 3.000 newly issued shares of Thompson's common stock. At the date of acquisition, the stock had a par value of $5 per share and a fair value of $25 per share. During October 2019, Thompson paid $10,400 to demolish an existing building on this land so it could construct a new building. d. Construction of Building B on the newly acquired land began on October 1, 2020. By September 30, 2021, Thompson had paid $210,000 of the estimated total construction costs of $300,000. Estimated completion and occupancy are July 2022. e. Certain equipment was donated to the corporation by the city. An independent appraisal of the equipment when donated placed the fair value at $16,000 and the residual value at $2,000. f. Equipment A's total cost of $110,000 includes installation charges of $550 and normal repairs and maintenance of $11,000. Residual value is estimated at $5,500. Equipment A was sold on February 1, 2021. g. On October 1, 2020, Equipment B was acquired with a down payment of $4,000 and the remaining payments to be made in 10 annual installments of $4,000 each beginning October 1, 2021. The prevailing interest rate was 8% Required: Supply the correct amount for each answer box on the schedule. (Round your intermediate calculations and final answers to the nearest whole dollar.) THOMPSON CORPORATION Fixed Asset and Depreciation Schedule For Fiscal Years Ended September 30, 2020, and September 30, 2021 < Prev 7 of 7 !!! Next

Answer 1

For fiscal year ended September 30, 2020 and September 30, 2021
Assets	Acquisition date	Cost	Residual	Depreciation method	Estimated life in years	Depreciation for year ended 9/30
						2020	2021
Land A	10/1/19	65000	N/A	N/A	N/A	N/A	N/A
Building A	10/1/19	747500	$47500	SL		14000	14000
Land B	10/2/19	85400	N/A	N/A	N/A	N/A	N/A
Building B	Under construction	280,000 to date	-	SL	30	-
Donated equipment	10/2/19	16000	2000	200% declining balance	10	3200	2560
Machine A	10/2/19	99000	5500	Sum-of-the-years-digits	10	17000	5100
Machine B	10/1/20	28988	-	SL	15	-	1933

Land A and Building A:

Allocation in proportion to appraised values at date of exchange:

	Amount	% of Total
Land	72000	8% (72000/900000)
Building	828000	92% (828000/900000)
	900000	100%

Land (812500*8%)	65000
Building (812500*92%)	747500
	812500

Estimated Life in Years of Building A = (747500-47500)/14000 = 50 years

Land B:

Cost:

3,000 shares × $25 per share	75000
Plus demolition of old building	10400
	85400

Building B:

Depreciation for Year Ended 9/30 (2021) = No depreciation before use

Donated Equipment: Fair value = $16000

Depreciation for Year Ended 9/30 (2020): $16000 × 20% (2 × Straight-line rate of 10%) = $3200

Depreciation for Year Ended 9/30 (2021): ($16000 – 3200) × 20% = $2560

Machine A:

Cost:

Total cost of $110,000 – $11000 in normal repairs = $99000

Depreciation for Year Ended 9/30 (2020):($99000 – 5500) × 10/55 = $17000

Depreciation for Year Ended 9/30 (2021):($99000 – 5500) × 9/55 × 4/12 = $5100

Machine B: PVAD = $4000* (7.24689) = $28988

Present value of an annuity due of $1: n= 10, i= 8% (from PVAD of $1)

Depreciation for Year Ended 9/30 (2021): 28988/15 = $1933