4 Buttfuski Alcohol Distribution Company

Fixed Assets

12.31.18

Balance Balance

Assets 12.31.17 Additions Retirements 12.31.18

Land $225,000 50,000 275,000

Buildings 1,200,000 175,000 1,375,000

Machinery &

Equipment 3,850,000 404,000 260,000 3,994,000

Total $5,275,000 $629,000 $260,000 $5,644,000

Accumulated

Depreciation

Building $600,000 $51,500 $651,500

Machinery &

Equipment 1,732,500 392,200 2,124,700

Total $2,332,500 $443,700 $2,776,200

Additional information as part of your audit:

1. All assets are depreciated on the straight-line basis with no salvage value taken into consideration based on the following estimated useful lives: buildings 25 years, all others 10 years. Policy is to take one-half year depreciation on all asset acquisitions and disposals during the year.

2. On 4.1.18, the company entered into a 10-year lease contract for a die casting machine with annual rentals of $50,000 payable in advance every 4.1. The lease is cancelable by either party and there is no option to renew the lease or buy the equipment at lease term end. The estimated useful life is 10 years and the equipment was recorded for $404,000, the present value at the date of lease with $20,200 applicable to this machine being charged as current year depreciation expense.

3. The company completed the construction of a wing of the plant on 6.30.18. The useful life of the building was not extended by this addition. The lowest construction bid received was $175,000, the amount recorded in the buildings account. Company personnel were used to construct the addition at a cost of $160,000.

4. On 8.18.18, $50,000 was paid for paving and fencing a portion of land owned by the company and used as a parking lot for employees. The cost was charged to the land account.

5. The amount shown in the machinery and equipment asset retirement column represents cash received on 9.5.18, upon disposal of a machine acquired on 7.1.2014 for $480,000. The bookkeeper recorded depreciation expense of $35,000 for this machine in 2018.

Required: Prepare any potential adjusting entries with supporting computations you would suggest for 12.31.18