Question

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 $1, FVA of $1, PVA of $1, FVAD of $1 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 $872,500 for the land and building together. At the time of acquisition, the land had a fair value of $76,800 and the building had a fair value of $883,200. c. Land B was acquired on October 2, 2019, in exchange for 3,600 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 $31 per share. During October 2019, Thompson paid $11,000 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 $270,000 of the estimated total construction costs of $360,000. 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 $18,400 and the residual value at $2,600. f. Equipment A's total cost of $109,000 includes installation charges of $610 and normal repairs and maintenance of $12,500. Residual value is estimated at $5,200. Equipment A was sold on February 1, 2021. g. On October 1, 2020, Equipment B was acquired with a down payment of $4,600 and the remaining payments to be made in 10 annual installments of $4,600 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.)

Answer 1

Ans

THOMPSON CORPORATION
Fixed Asset and Depreciation Schedule
For Fiscal Years 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	10/1/2019	$69,800	N/A	N/A	N/A	N/A	N/A
Building A	10/1/2019	$802,700	$72,700	SL	50	$14,600	$14,600
Land B	10/2/2019	$122,600	N/A	N/A	N/A	N/A	N/A
Building B	Under construction	270,000 to date	0	SL	30	0	0
Donated Equipment	10/2/2019	$18,400	2,600	200% Declining balance	10	$2,944	$2,355
Equipment A	10/2/2019	$96,500	5,200	Sum-of-the years'-digits	10	$15,940	$13,280
Equipment B	10/1/2020	$35,466	0	SL	15	0	$2,364

Land A and Building A:

Allocation in proportion to appraised values at date of exchange:

	Amount	%age
Land	$          76,800.00	8%	$          69,800.00
Building	$        883,200.00	92%	$       802,700.00
	$        960,000.00		$       872,500.00

Estimated Life in Years of Building A: 50 Years

Depreciation as per SLM = Cost - Residual Value / No. of years

Depreciation of Building A = $802,700 - $ 72,700 / 50 = $ 730,000/ 50 = $ 14,600 (same every year)

Land B:

Cost:

3600 shares * $31 per share = $ 111,600

Add : Demolition of old building = $ 11,000

Total Cost = $ 122,600

Building B: No depreciation is charged before use.

Donated Equipment:

Fair value = $18,400

200% Declining balance
Depreciation rate: 20%
	Book Value	Depreciation
1/10/2019	18,400	3,680
1/10/2020	14,720	2,944
1/10/2021	11,776	2,355

Equipment A:

Cost:

Total cost of $109,000 – $12,500 in normal repairs = $96,500

The digits in the years of the equipment's useful life are summed: 1+2+3+4+5+6+7+8+9+10 = 55

Cost - residual = $96,500 - $5,200 = $91,300.

Depreciation:

Year 1 $91,300*10/55= 16,600

Year 2 $91,300*9/55= 14,940

Year 3 $91,300*8/55= 13,280

Sum-of-the-years-digits
	Depreciation
1/10/2019	16,600
1/10/2020	14,940
1/10/2021	13,280

Equipment B:

Cost = $ 4,600 + ($ 4,600 * 6.71008139) = $ 4,600 + $ 30,866 = $35,466

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

Depreciation as per SLM = Cost - Residual Value / No. of years

Depreciation = $ 35,466 - 0 / 15 = $2,364