Question

The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2016. 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 S1, PV of S1. EVA of S1. PVA of S1, FVAD of $1 and PVAD of S) (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 $772,500 for the land and building together At the time of acquisition, the land had a fair value of $103,.200 and the building had a fair value of $756,800 acquisition, the stock had a par value of $5 per share and a fair value of $21 per share. During October 2016, Thompson paid $10,000 to demolish an existing building on this land so it could construct a new building. $170,000 of the estimated total construction costs of $260,000. Estimated completion and occupancy are July 2019. the fair value at $14400 and the residual value at $1,600. value is estimated at $5,000. Machine A was sold on February 1, 2018 installments of $3,600 each beginning October 1, 2018. The prevailing interest rate was 7%. c Land B was acquired on October 2, 2016, in exchange for 2,600 newly issued shares of Thompson's common stock. At the date of d. Construction of Building B on the newly acquired land began on October 1, 2017 By September 30, 2018, Thompson had paid e. Certain equipment was donated to the corporation by the city. An independent appraisal of the equipment when donated placed f. Machine A's total cost of $102,000 includes installation charges of $510 and normal repairs and maintenance of $10,600. Residual g. On October 1, 2017, Machine B was acquired with a down payment of $3,600 and the remaining payments to be made in 10 annual Required: Supply the correct amount for each answer box on the schedule. (Round your final answers to nearest whole dollar) THOMPSON CORPORATION Fixed Asset and Depreciation Schedule For Fiscal Years Ended September 30, 2017, and September 30, 2018 Depreciation for Year Ended 9/30 Depreciation Method Estimated Life in Years Acquisition Date Cost Residual Assets 2017 2018 Land A Building A Land B Building B Donated Equipment 10/2/16 Machine A10/2/16 Machine B 10/1/17 N/A $40,600 N/A N/A SL N/A SL 1,000 | 150% Declining balance 5,000 Sum-of-the years'-digits SL N/A N/A 10/1/16 10/1/16 10/2/16 Under construction 170,000 to date N/A 3,600 N/A N/A 30 10 N/A 16

Answer 1

Answer

Depreciation Depreciation Method NA Estimated Life NA uisition Date Residual Asset Land A Building A Land B Cost 2017 2018 1-Oct-16 1-Oct-16 2-Oct-16 92,700 NA 679,800 NA NA 40,600 SL 47 13,600 13,600 64,600 NA NA NA NA NA Under Construction 170,000 till date NA Building B SL 30 NA NA 150% Declining Donated Euipment Machine A Machine B 1,600 Method 5,000 Sum of year Digits 10 9 16 1,767 1,280 1,805 2-Oct-16 2-Oct-16 1-Oct-17 14,400 91,400 28,885 2,079 16,800 451 OSL Workin Fair Value Allocation Land A Building A 103,200 756,800 860,000 92,700 679,800 772,500 Building A Cost Residual Value Depreciable Amount Life Annual Depraiction 679,800 40,600 639,200 47 years 13,600 Land B FV of Shares Issued Demolition Cost Total Cost 54,600 (2600 21 10,000 64,600

Donated Equipment Donated Equipment 150%-declining balance Straight-line depreciation rate:(100% divided by 10 years 150% of the straight-line rate is 10.00% 15% This rate is applied to the book value of the asset at the beginning of each year. (Book value is cost minus accumulated depreciation Cost of Machine Salvage Value Depreciable amount 14,400 1,600 12,800 Accumulated Depreciation Book Value Depreciation Year 14,400 12,240 10,404 8,843 7,517 6,389 5,431 4,616 3,924 3,335 1,600 2,160 $ 1,836 $ 1,561 $ 2,160 3,996 S 5,557 $ 6,883 S 2 1,327 1,128 8,011 8,969 5 958 815 692 6 9,784 S 10,476 589 $11,065 1,735 12,800 10 iation stops when book value iation expense 2017 residual value Answer (a Deprec 2,160 Date of Purchase 2 Oct 2016 20163 months Depreciation 2017 (9 months +3 months 2018 (9 months +3 months 2019 (9 months +3 months) 2020 (9 months+3 months 2021 (9 months+3 months 2022 (9 months+3 months 2023 (9 months +3 months 2024 (9 months +3 months 2025 (9 months +3 months 2024 (9 months +3 months 2,079 1,767 1,502 1,277 1,085 922 784 875 1,301 12,800 2,079 1,767 ciation expense 2017 Depre Depreciation expense 2018

Machine A Total Cost Less: Repair & Maint Capitalised Cost 102,000 10600 91400 Depreciation expense of each year of the useful life of the machine using sum of years' digits method Cost Of Machine Salvage Value 1,400 86,400 Remaining life of the Depreciation fraction Depreciation Expense Book Value 4,120 8,760 Year Depreciation Base asset 86,400 86,400 86.400 86,400 86.400 86,400 86.400 86,400 86.400 17,28o 15,360 0 11,520 9,600 680 9 8 0.1 0.2 8 0.155555556 6 0.133333333 3,800 24,200 16,520 10,760 6,920 4 0.088888889 o.o6666666 8 20.0 0 1 o.022222222 1,920 86400 9 Date of Purchase 2 Oct 2016 2016 3 months Depreciation $ 2017 (9 months +3 months)$ 2018 (9 months +3 months) 2019 (9 months +3 months)$ 2020 (9 months +3 months) $ 2021 (9 months +3 months)$ 2022 (9 months +3 months)$ 2023 (9 months +3 months)$ 2024 (9 months +3 months) $ 2025 (9 months +3 months) 4,320 16,800 14,880 12,960 11,040 9,120 7,200 5,280 3,360 1,440 86,400 Depreciation expense 2017 Depreciation expense 2018 upto 1 Feb 2018 16,800 1,280

Machine B Workin Year Year for discounti 10 4 Annual Lease Installments paid at the ginning of the year PV factor @ 7% Present Value of Min lease 3,600 0.93458 3,364 3,600 0.81630 2,939 3,600 3,600 1.00000 3,600 3,600 0.87344 3,144 3,6003,600 3,600 3,600 3,600 0.76290 0.712990.66634 0.62275 0.58201 0.54393 0.50835 2,3992,2422,095 1,958 1,830 3,600 2,746 2,567 Value at which to be recorded as asset Annual Depreciation Present value 16 28,885 Depreciation expense 2017 (3 months) 451 reciation ex 2018 1,805