1.

E8-3 (Algo) Computing and Recording Cost and Depreciation of Assets (Straight-Line Depreciation) LO8-2, 8-3

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Shahia Company bought a building for $79,000 cash and the land on which it was located for $108,000 cash. The company paid transfer costs of $11,000 ($7,000 for the building and $4,000 for the land). Renovation costs on the building before it could be used were $35,000.

E8-3 Part 1

Required:

1. Prepare the journal entry to record the purchase of the property, including all relevant expenditures. Assume that all transactions were for cash and that all purchases occurred at the start of the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. E8-3 (Algo) Computing and Recording Cost and Depreciation of Assets (Straight-Line Depreciation) LO8-2, 8-3

Shahia Company bought a building for $79,000 cash and the land on which it was located for $108,000 cash. The company paid transfer costs of $11,000 ($7,000 for the building and $4,000 for the land). Renovation costs on the building before it could be used were $35,000.

What would be the net book value of the property (land and building) at the end of year 2? (Amounts to be deducted should be indicated by a minus sign.)

3. During Year 1, Ashkar Company ordered a machine on January 1 at an invoice price of $29,000. On the date of delivery, January 2, the company paid $9,000 on the machine, with the balance on credit at 9 percent interest due in six months. On January 3, it paid $700 for freight on the machine. On January 5, Ashkar paid installation costs relating to the machine amounting to $2,500. On July 1, the company paid the balance due on the machine plus the interest. On December 31 (the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $3,100.

Required: Indicate the effects of each transaction on the accounting equation. (Enter decreases to account categories as negative amounts. If the transaction does not impact the accounting equation choose "No effect" in the first column under "Assets".)

4. During Year 1, Ashkar Company ordered a machine on January 1 at an invoice price of $29,000. On the date of delivery, January 2, the company paid $9,000 on the machine, with the balance on credit at 9 percent interest due in six months. On January 3, it paid $700 for freight on the machine. On January 5, Ashkar paid installation costs relating to the machine amounting to $2,500. On July 1, the company paid the balance due on the machine plus the interest. On December 31 (the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $3,100.

Compute the acquisition cost of the machine.