Allocation of Package Purchase Price and Depreciation Methods

In an expansion move, James Company paid $2,190,000 for most of the property, plant, and equipment of a small manufacturing firm that was going out of business. Before agreeing to the price, James hired a consultant for $25,000 to appraise the assets. The appraised values were as follows:

Land	$384,000
Building	912,000
Equipment	960,000
Trucks	144,000
Total	$2,400,000

James issued two checks totaling $2,215,000 to acquire the assets and pay the consultant on April 1. James depreciated the assets using the straight-line method for the building and equipment, and the double-declining balance method for the trucks. Estimated useful lives and salvage values were as follows:

	Useful Life	Salvage Value
Building	30 years	$86,000
Equipment	10 years	70,000
Trucks	4 years	13,000

a. Calculate the amounts allocated to the various types of plant assets acquired on April 1.

Asset	Total
Land	Answer
Building	Answer
Equipment	Answer
Trucks	Answer

b. Prepare the April 1 journal entries to record the purchase of the assets and the payment to the consultant. Combine both cash disbursements into one journal entry.

General Journal
Date	Description	Debit	Credit
Apr.1	Land	Answer	Answer
	Building	Answer	Answer
	Equipment	Answer	Answer
	Trucks	Answer	Answer
	Cash	Answer	Answer
	To record purchase of plant assets and payment to consultant.

c. Prepare the December 31 journal entries to record depreciation expense for the year on the building, trucks, and equipment. (Round to the nearest dollar.)

General Journal
Date	Description	Debit	Credit
Dec. 31	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	To record depreciation on building.
Dec. 31	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	To record depreciation on equipment.
Dec. 31	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	To record depreciation on trucks.