21 12-58 LO 8 You are performing the year-end audit of Halvorson Fine Foods, Inc. for December 31, 2015. The client has prepared the following schedule for the fixed assets and related allowance for depreciation accounts. Final Balance, December 31, 2014 Description Additions Retirements Per Books, December 31, 2015 Assets: Land Buildings Machinery and equipment $22,500 120,000 385,000 $527,500 $5,000 17,500 40,400 $62,900 $27,500 137,500 399,400 $564,400 $26,000 $26,000 Allowance for depreciation: Building Machinery and equipment $60,000 173,200 $233,250 $5,150 39,220 $65,150 212,470 $277,620 $44,370 on labeled an dit. Review this and each of the audit (other basis (no sal following as, 10 years. depreciation w the lease You have compared the opening balances with your year audit working papers. The following information prior 1 through 6) is found during your current-year audit information and indicate how you might have found described items (labeled as I through 6) during the audi than through client inquiry). 1. All equipment is depreciated on a straight-line basis in vage value taken into consideration) based on the folle estimated lives: buildings, 25 years; all other items, 10 The company's policy is to take one-half year's deprec on all asset acquisitions and disposals occurring during year. 2. On April 1 of the current year, the company entered into a ten-year lease contract for a die-casting machine with annual rentals of $5,000, payable in advance every April The lease is cancelable by either party (60 days' written notice is required), and there is no option to renew the or buy the equipment at the end of the lease. The estima useful life of the machine is ten years with no salvage ya The company recorded the die-casting machine in the machinery and equipment account at $40,400, the pres 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 lowed 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 machin- ery and equipment asset represents cash received on Septem- ber 5, on disposal of a machine purchased in July 2001 for $48,000. The bookkeeper recorded a depreciation expense of $3,500 on this machine in 2013. 6. Crux City donated land and building appraised at $10,000 and $40,000, respectively, to Halvorson for a plant. On Sep- tember 1, the company began operating the plant. Because no costs were involved, the bookkeeper made no entry for the foregoing transaction. 1 dl firm of Cowan 21 12-58 LO 8 You are performing the year-end audit of Halvorson Fine Foods, Inc. for December 31, 2015. The client has prepared the following schedule for the fixed assets and related allowance for depreciation accounts. Final Balance, December 31, 2014 Description Additions Retirements Per Books, December 31, 2015 Assets: Land Buildings Machinery and equipment $22,500 120,000 385,000 $527,500 $5,000 17,500 40,400 $62,900 $27,500 137,500 399,400 $564,400 $26,000 $26,000 Allowance for depreciation: Building Machinery and equipment $60,000 173,200 $233,250 $5,150 39,220 $65,150 212,470 $277,620 $44,370 on labeled an dit. Review this and each of the audit (other basis (no sal following as, 10 years. depreciation w the lease You have compared the opening balances with your year audit working papers. The following information prior 1 through 6) is found during your current-year audit information and indicate how you might have found described items (labeled as I through 6) during the audi than through client inquiry). 1. All equipment is depreciated on a straight-line basis in vage value taken into consideration) based on the folle estimated lives: buildings, 25 years; all other items, 10 The company's policy is to take one-half year's deprec on all asset acquisitions and disposals occurring during year. 2. On April 1 of the current year, the company entered into a ten-year lease contract for a die-casting machine with annual rentals of $5,000, payable in advance every April The lease is cancelable by either party (60 days' written notice is required), and there is no option to renew the or buy the equipment at the end of the lease. The estima useful life of the machine is ten years with no salvage ya The company recorded the die-casting machine in the machinery and equipment account at $40,400, the pres 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 lowed 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 machin- ery and equipment asset represents cash received on Septem- ber 5, on disposal of a machine purchased in July 2001 for $48,000. The bookkeeper recorded a depreciation expense of $3,500 on this machine in 2013. 6. Crux City donated land and building appraised at $10,000 and $40,000, respectively, to Halvorson for a plant. On Sep- tember 1, the company began operating the plant. Because no costs were involved, the bookkeeper made no entry for the foregoing transaction. 1 dl firm of Cowan