Moreau Lock & Key Ltd. has a hefty investment in security equipment, as reported in the company's
Question:
Moreau Lock & Key Ltd. has a hefty investment in security equipment, as reported in the company's balance sheet at December 31, 2016:
Property, plant, and equipment, at cost:
Land ...................................................................................................................... $ 200,000
Buildings .................................................................................................................. 310,000
Less Accumulated depreciation ............................................................................ (40,000)
Security equipment ................................................................................................ 620,000
Less Accumulated depreciation ........................................................................... (370,000)
In early October 2017, Moreau Lock & Key purchased additional security equipment at a cost of $80,000. The company depreciates buildings by the straight-line method over
20 years with a residual value of $70,000. Due to obsolescence, security equipment has a useful life of only eight years and is being depreciated by the double-diminishing-balance method with zero residual value.
Requirements
1. How will Moreau Lock & Key's equipment purchase be recorded? What will the 2017 depreciation expense be?
2. Report property, plant, and equipment on the company's December 31, 2017, balance sheet?
Step by Step Answer:
Financial Accounting
ISBN: 978-0134564142
6th Canadian edition
Authors: Walter Jr. Harrison, Charles T. Horngren, C. William Thomas, Greg Berberich, Catherine Seguin