Question

Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2016. The accounting department Thompson has started the fixed-asset and depreclation schedule presented below. You have been asked to assist In completing ths schedule. In addition to ascertalning that the data already on the schedule are correct, you have obtalned 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. Depreclation is computed from the first of the month of acqulsition to the first of the month of disposition. b. Land A and Bulding A were acquired from a predecessor corporation. Thompson pald $872,500 for the land and bullding together. At the time of acquisition, the land had a falr value of $76,800 and the building had a falr value of $883,200. c. Land B was acquired on October 2, 2016, In exchange for 3,600 newly Issued shares of Thompson's common stock. At the date of acqulsition, the stock had a par value of $5 per share and a falr value of $31 per share. During October 2016, Thompson pald d. Construction of Bullding B on the newly acquired land began on October 1, 2017. By September 30, 2018. Thompson had pald e. Certaln equipment was donated to the corporation by the city. An Independent appralsal of the equlpment when donated placed f. Machine A's total cost of $109,000 Includes Installation charges of $610 and normal repairs and malntenance of $12,500. Resldual g. On October 1, 2017, Machine B was acqulred with a down payment of $4,600 and the remalning payments to be made In 10 annual $11,000 to demolish an existing building on this land so lt could construct a new bullding. $270.000 of the estimated total construction costs of $360,000. Estlmated completion and occupancy are July 2019. the falr value at $18,400 and the residual value at $2600. value Is estimated at $5,200. Machine A was sold on February 1, 2018. Installments of $4,600 each beginning October 1, 2018. The prevaling Interest rate was 8%. Supply the correct amount for each answer box on the schedule. (Round your final answers to nearest whole dollar.) Fixed Asset and Depreciation Schedule For Fiscal Years Ended September 30, 2017, and September 30, 2018 Depreciation for Life in Years Year Ended 9/30 2017 2018 Estimated Assets Cost ResidualDepreciation Date Method Land A Building A Land B Building B Donated Equipment 10/216 MachineA Machine B 10/1/16 10/1/16 10/2/16 Under construction 270,000 to date 572,700 SL NIA SL 2.600| 150% Declining balance 200 Sum-of-the years'-digits SL 14,600 NIA 30 10 10 15 10/216

Answer 1

Answer

Depreciation Depreciation Method NA Estimated Life NA Asset Land A Building A Land B Acquisition Date Cost Residual 2017 2018 1-Oct-16 1-Oct-16 2-Oct-16 69800 NA NA NA 802700 72700 SL 146001 14600 14600 122,600 NA NA NA NA NA Under Construction Building B 270,000 till date NA SL 30 NA NA 150% Declining Donated Euipment Machine A Machine B 2-Oct-16 2-Oct-16 1-Oct-17 18400 96,500 35,466 2600 Method 5,200 Sum of year Digits 10 10 16,600 15 NA 2370 2,015 4,980 2,364 OSL

Workings Fair Value Allocation Land A Building A 76,800 883,200 960,000 69,800 802,700 872,500 Building A Cost Residual Value Depreciable Amount Life Annual Depraiction 802,700 72,700 730,000 50 vears 14,600 Land B FV of Shares Issued Demolition Cost Total Cost 111,600 11,000 122,600 Donated Equipment SLM Rate 150% rate Donated Equipment 10% 15.00% Cost Salvage Value Depreciable amount 18400 2600 15800 Accumulated Depreciation Depreciation Book Value 2-Oct-16 30-Sep-17 30-Sep-18 30-Sep-19 2370 2,015 1,712 2370 4,385 6,097 15800 13430 11,416 9,703

Machine A Total Cost Less: Repair & Maint Capitalised Cost 109,000 12500 96500 Depreciation expense of each year of the useful life of the machine using sum of years' digits method Cost Of Machine Salvage Value 96,500 200 91,300 life of the Depreciation Base Depreciation epreciation Expense asset fraction Book Value Iear 10 0.181818182 9 0.163636364 8 0.145454545 1,300 91,300 1,300 91,300 1,300 91,300 1,300 91,300 1,300 91,300 16.600 14,940 13,28o 11,620 9,960 8,300 6,640 4,980 320 1,660 ,900 64,960 2 1,680 40,060 30,100 21,800 15,160 10,180 6,860 200 0.12727272 6 0.109090909 6 0.090909091 40.0727272 8 0.054545455 2 o.036363636 1 0.018181818 10 1300

Machine B Workings Year Year for discountin Annual Lease Installments paid at the beginning of the year PV factor @8% Present Value of Min lea Value at which to be recorded as asset 2 4 10 0 6 9 10 4,600 1.00000 4,600 4,600 0.92593 4,259 4,600 0.85734 3,944 4,600 0.79383 3,652 4,600 4,600 4,6004,600 4,600 4,6004,600 0.73503 0.68058 0.63017 0.58349 0.54027 0.50025 0.46319 3,3813,1312,899 2,684 2,485 2,301 2,131 35,466