Question

Problem 11-8 Culver Sporting Goods Inc. has been experiencing growth the demand for its products over the last several years. The last two Olympic Games greatly increased the retailing consortium entered into an agreement with Culver's Roundball Division to purchase bhpllc and othll around world. As a result, t 5 vears. accessories an increasing basis the next To be able to meet the quantity commitments of this agreement, Culver had to obtain additional manufacturing capacity. A real estate firm located an available factory in close proximity to Culver's Roundball manufacturing facility, and Culver agreed to purchase the factory and used machinery from Encino Athletic Equipment Company on October 1, 2016. Renovations were necessary to convert the factory for Culver's manufacturing use. The terms of the agreement required Culver to pay Encino $64,000 when renovations started on January 1, 2017, with the balance to be paid as renovations were completed. The overall purchase price for the factory and machinery was $512,000. The building renovations were contracted to Malone Construction at $128,000. The payments made, as renovations progressed during 2017, are shown below. The factory was placed in service on January 1, 2018 1/1 4/1 10/1 12/31 Encino $64,000 $115,200 $140,800 $192,000 Malone 38,400 38,400 51,200 On January 1, 2017, Culver secured a $640,000 line-of-credit with a 12% interest rate to finance the purchase cost of the factory and machinery, and the renovation costs. Culver drew down on the line-of-credit to meet the payment schedule shown above; this was Culver's only outstanding loan during 2017 Bob Sprague, Culver's controller, will capitalize the maximum allowable interest costs for this project. Culver's policy regarding purchases of this nature is to use the appraisal value of the land for book purposes and prorate the balance of the purchase price over the remaining items. The building had originally cost Encino $384,000 and had net book value of $64,000, while the machinery originally cost $160,000 and had a net book value of $51,200 on the date of sale. The land was recorded on Encino's books at $51,200. An appraisal, conducted by independent appraisers at the time of acquisition, valued the land at $371,200, the building at $134,400, and the machinery at $57,600. Angie Justice, chief engineer, estimated that the renovated plant would be used for 15 years, with an estimated salvage value of $38,400. Justice estimated that the productive machinery would have a remaining useful life of 5 years and method for machinery and the 150 % declining-balance method for the plant. One-half year's depreciation is taken in the year the plant is placed in service, and one-half year is allowed when the property is disposed of or retired. Culver uses a 360-day year for calculating interest costs. salvage value of $3,840. Culver's depreciation policy specifies the 200% declining-balance Your answer is partially correct. Try again. Determine the amounts to be recorded on the books of Culver Sporting Goods Inc. as of December 31, 2017, for each Athletic Equipment Company. (Round intermediate calculations to places, e.g. 45,892.) f the following properties acquired from Encino decimal places for computational purposes, e.g. 1.54687 and final answers to 0 decimal (1) Land 371200 (2) Buildings 98560 (3) Machinery 42240 Your answer is partially correct. Try again. Calculate Culver Sporting Goods Inc.'s 2018 depreciation expense, for book purposes, for each of the properties acquired from Encino Athletic Equipment Company. Depreciation Expense (1) Land (2) Buildings (3) Machinery

Answer 1

Aracory Pgeato Aand Appraisal value 431200 hand value 31200 Suiking Remaining puorchane price albocskon = (ts1a00 - 341200) 34460 X 34400t57600 34400 40800 X 192000 (40800 х 70 8560 Renovations 8000 Castatigedntene The Captaligol fatera cafeulated ollocos

Capitabigtiighted ege Poriad 6400012 Total amount Halone Date Encino accunulat ed expenlitanes G4000 64000 f15 300 3gy00 153600912 I15aoo 140,800 38400 19200| 44800 ra a 9a000 5200 43000 oia $6401000 $ 2a4000 2mont) .Jan do dec Avotdable Entenesf 26880 Total bulding cont 98660 a8000 t a6880 a53440 Heeeery Kemairing pchase price allocaion CE12000-31200) X -"7600 (34100 57600) 40800 x 30/

NO 44240 4340 Hachinny Total hand 3tI00 Beilding 253440 Mlachinesy 4240 hand depreciation ezpente tor because doesnt hore no has depreciati on Sudeing Pepreciation expense 353440X 1507. xx 261a .Aepreciation expene - 9

Poge NOr echinoy 440 x c0yx Deprecsiation txpense X 8hh3 Depreeiotion expense Deprecatfon expni hond Sufding rtechinay $8448