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1. Cost of Capital Asser On March 1, ABC Holdings purchased land and three buildings for $1,200,000. The plan was to use Building 1
1. Cost of Capital Asser On March 1, ABC Holdings purchased land and three buildings for $1,200,000. The plan was to use "Building 1" as an office and to demolish "Building 2" and "Building 3" to make room for a parking lot. An appraisal established the following values: Land Building 1 $750,000 250,000 Building 2 Building 3 In addition to the purchase of the land and buildings, ABC paid to have the following done: Clean-up & level land to prepare land for use $ 20,000 Renovation on Building 1 Demolish old building Construct parking lot 5,000 12,000 5,000 Also, ABC received $2,000 cash for salvage of fixtures from "Building 2". Prepare the journal entries for the purchase and the work done, assuming everything was completed on March 1. 2. Depreciation On July 1, 2019 your company purchased a vehicle for $42,500. You expect to use it for 4 years or 100,000 km, at which point you will sell it for $2,500. Calculate and journalize depreciation at December 31, 2019 and December 31, 2020 using: straight line, double declining balance, and units of production methods. In 2019 you drove the vehicle for 20,000 km and in 2020 you drove it 25,000 km. 3. Revised Depreciation Year #1 Machine Cost 50,000 and life. Salvage value Useful Life 5,000 5 yr -use straight line depreciation - in the beginning of year 4 add a module that increases usefulness Cost of Module Extends life to a total of: 10,000 8 yr (i.e. 3 more years) SV decreases to 3,000 Prepare journal entry to record modification Calculate depreciation expense for the end of year 4 4. Disposal of Capital Asset Asset Cost 100,000
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