Question

Willo Company recently negotiated a lump-sum purchase of several assets from a road equipment dealer who was planning to change locations. The purchase was completed on September 30, 2019, at a total cash price of $870,000 and included a garage with land and certain land improvements and a new heavy, general-purpose truck. The estimated fair market values of the assets were: garage, $552,750; land, $331,650; land improvements, $100,500; and truck, $20,100. Willo has a December 31 year-end.

REQUIRED:

1. Prepare a schedule to allocate the lump-sum purchase price to separate assets that were purchased. Also present the general journal entry to record the purchase.
2. Calculate the 2020 depreciation expense on the garage using the straight-line method and assuming a 15-year life and a $37,500 salvage value.
3. Calculate the 2019 depreciation expense on the land improvements assuming an eight-year life and double-declining-balance depreciation.
4. The truck is expected to last five years and have a salvage value of $2,250. Prepare a schedule showing each year's depreciation on the truck, assuming (a) five-year straight-line depreciation and (b) double-declining-balance depreciation.

Answer 1

Please find the attached sheet for detailed answer,

Please comment for any explanation,

Thanks.

X х Cla 9.aug - Microsoft Excel Home Insert Page Layout Formulas Data Review View X 4 Cut Times New Rom 11 - A A A 2 Wrap Text General Paste La Copy Format Painter Clipboard BI U Merge & Center +0.00 .00 0 Insert Delete Format Conditional Format Cell Formatting as Table Styles Styles AutoSum - Fill Sort & Find & 2 Clear Filter - Select Editing Font Alignment Number Cells M1 foc B с D E F G H 1 J K L M M N o P Q R A 1 2 Solution- 3 4 4. 1] Allocation of Lumpsum assets The Asset must be booked at proportinate fair value of asssets. 5 Credit 6 Garage Land Land Improvement Truck Total 7 8 9 10 Fair value Book Value 552750 478500 331650 287100 100500 87000 20100 17400 1005000 870000 Journal entry- Garage Land Land Improvement Truck Cash Debit 478500 287100 87000 17400 870000 11 12 2] Depreciation Expenes on Garage- 29400 ok value-salvage value] /Useful Since this garage have been used for full year i.e 2020, hence full depreciation have been provided 13 14 15 3] Depreciation Expenses on Land Imp- 5437.5.M Depreciation Since the asset have been used only 3 month in the year 2019, hence 3 month depreciation have been provided 16 4] Truck Depreciation's 17 18 Book 19 Book value Salvage value Useful Life Rate of depreciation Rate of Dep (Double declining) 20 21 17400 2250 5 Year 0.2 0.4 Year 1 Depreciation schedule (SLM) Depreciable End of the year Cost * DepN Exp Accu DepN 15150 3030 3030 12120 3030 6060 9090 3030 9090 6060 3030 12120 3030 3030 15150 Value 14370 11340 8310 5280 2250 2 3 4 Depreciation schedule [Double declining] Depreciable End of the year Book Year Cost DepN Exp Accu DepN Value 1 15150 6060 6060 11340 2 9090 3636 9696 7704 3 5454 2181.6 11877.6 5522.4 4 3272.4 1308.96 13186.56 4213.44 5 1963.44 1963.44 15150 2250 In DD Deprecition method last year depreciation is calculated on balanceing figure. 22 23 24 5 25 26 27 28 Sheet1 Sheet2 Sheet4 Sheet3 Sheet6 Sheets Sheets Sheet7 Sheets Sheet10 Sheet14 Sheet13 | Ready BOI 90% UA + O ILL 1 09:40 24-09-2020

X 123 fx Σ X х 7 Cin 9.aug - Microsoft Excel Home Insert Page Layout Formulas Data Review View a Define Name - Trace Precedents Show Formulas Calculate Now f Use in Formula Trace Dependents Error Checking Insert AutoSum Recently Financial Logical Text Date & Lookup & Math More Name Watch Calculation Calculate Sheet Function Used - Time Reference & Trig. Functions Manager Create from Selection Remove Arrows Remove Arrows - Evaluate Formula Evaluate Formula Window Options Function Library Defined Names Formula Auditing Calculation L27 foc A с D E F G H K L M N o 1 2 Solution- 3 1] Allocation of Lumpsum assets The Asset must be booked at proportinate fair value of asssets. 4. 5 Fair value Book Value Journal entry- Debit Credit 6 Garage 552750 =+E10*D6/D10 =+C6 =+E6 7 Land 331650 =+E10*D7/D10 =+C7 =+E7 Land Improvement 100500 =+E10*D8/D10 =+C8 =+ES 9 Truck 20100 =+E10*D9/D10 =+C9 =+E9 10 Total =SUM(D6:09) 870000 Cash =+SUM(16:19) 11 12 2] Depreciation Expenes on Garage =+(E6-37500)/15 Book value-salvage value] /Useful lif Since this garag 13 14 3] Depreciation Expenses on Land Imp- =+((E8-0)/8*200%)*3/12 SLM Depreciation*2 Since the asset 15 16 4] Truck Depreciation's- 17 Depreciation schedule (SLM] Depreciation schedule [Double declining] 18 Book value =+E9 Depreciable End of the year Book Depreciable End of the year Book 19 Salvage value 2250 Year Cost DepN Exp Accu DepN Value Year Cost DepN Exp Accu DepN Value 20 Useful Life 5 Year 1 =+C18-C19 =+E20/5 =+G20 =+C18-H20 1 =+E20 =+K20*C22 =+M20 =+C18-N20 21 Rate of deprecia=1/5 2 =+C18-C19-H20 =+E21/4 =+H20+G21 =+C18-H21 2 =+K20-N20 =+K21*C22 =+N20+M21 =+C18-N21 22 Dep Double des =+C21*2 3 =+E20-H21 =+E22/3 =+H21+G22 =+C18-H22 3 =+K21-M21 =+K22*C22 =+N21+M22 =+C18-N22 23 4 =+E20-H22 =+E23/2 =+H22+G23 =+C18-H23 4 =+K22-M22 =+K23*C22 =+N22+M23 =+C18-N23 24 5 =+E20-H23 =+E24/1 =+H23+G24 =+C18-H24 5 =+K23-M23 =+K24 =+M24+N23 =+C18-N24 25 In DD Depreciti 26 27 28 K► Sheet3 Sheet6 Sheet Sheet8 Sheet7 Sheets Sheet10 Sheet14 Sheet13 Sheet13 Sheet12 Sheet11 IIII Ready BO 90% O X 09:42 24-09-2020