You are performing the year-end audit of Halvorson Fine Foods, Inc. for December 31, 2024. The client has prepared the following schedule for the fixed assets and related allowance for depreciation accounts. 

You have compared the opening balances with your prior-year audit working papers. You find the following information, labeled as 1 through 6, during your current-year audit. Review this information and indicate how you might have found each of the described items during the audit (other than through client inquiry). 

1. All equipment is depreciated on a straight-line basis (no salvage value taken into consideration) based on the following estimated lives: buildings, 25 years; all other items, 10 years. The company’s policy is to take one-half year’s depreciation on all asset acquisitions and disposals occurring during the year. 

2. On April 1 of the current year, the company entered into a 10-year lease contract for a die-casting machine with annual rentals of $5,000, payable in advance every April 1. The lease is cancellable by either party (60 days’ written notice is required), and there is no option to renew the lease or buy the equipment at the end of the lease. The estimated useful life of the machine is 10 years with no salvage value. The company recorded the die-casting machine in the machinery and equipment account at $40,400, the present value at the date of the lease, and $2,020, applicable to the machine, has been included in depreciation expense for the year. 

3. The company completed the construction of a wing on the plant building on June 30 of the current year. The useful life of the building was not extended by this addition. The lowest construction bid received was $17,500, the amount recorded in the buildings account. Company personnel were used to construct the addition at a cost of $16,000 (materials, $7,500; labor, $5,500; and overhead, $3,000). 

4. On August 18, Halvorson paid $5,000 for paving and fencing a portion of land owned by the company for use as a parking lot for employees. The expenditure was charged to the land account. 

5. The amount shown in the retirements column for the machinery and equipment asset represents cash received on September 5, on disposal of a machine purchased in July 2004 for $48,000. The bookkeeper recorded a depreciation expense of $3,500 on this machine in 2024. 

6. Crux City donated land and building appraised at $10,000 and $40,000, respectively, to Halvorson for a plant. On September 1, the company began operating the plant. Because no costs were involved, the bookkeeper made no entry for the foregoing transaction.

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Description Assets: Land Buildings Machinery and equipment Allowance for depreciation: Building Machinery and equipment Final Balance December 31, 2023 $22,500 120,000 385,000 $527,500 $60,000 173,200 $233,250 Additions Retirements $5,000 17,500 40,400 $26,000 $62,900 $5,150 39,220 $44,370 $26,000 Per Books, December 31, 2024 $27,500 137,500 399,400 $564,400 $65,150 212,470 $277,620