Blue Corporation, a private enterprise, made the following purchases related to its property, plant and equipment during its fiscal year ended December 31, 2020. The company uses the straight-line method of depreciation for all its capital assets. 1. In early January, Blue issued 139,790 common shares in exchange for property consisting of land and a warehouse On the date of acquisition, a reliable, independent appraiser estimated that the fair value of the land and warehouse was $599,520 and $299,760, respectively. The seller had advertised a price of $859,510 or best offer for the land and warehouse in a commercial retail magazine. Blue paid a local real estate broker a finder's fee of $34,760. The most recent sale of Blue's shares took place a month prior when 15,000 common shares were sold for $8 per share. 2 On March 31. the company acquired equipment on credit. The terms were a $6,750 cash down payment plus payments of $4,680 on March 31 for each of the next 3 years. The implicit interest rate was 11%. The equipment's list price was $16,710. Additional costs that were incurred to install the equipment included $830 to tear down and replace a wall and $1.420 to rearrange existing equipment to make room for the new equipment. An additional $800 was spent to repair the equipment after it was dropped during installation During the year, the following events also occurred 4. 3. Anew motor was purchased for $49,530 for a large grinding machine (original cost of the machine, $349,560; accumulated depreciation at the replacement date,$99,900). The motor will not improve the quality or quantity of production, however, it will extend the grinding machine's useful life from the current 10 years to 8 years. (Ignore the IFRS requirement to estimate and remove the cost of the old motor) The company purchased a small building in a nearby town for $124,580 to use as a display and sales location. The municipal tax assessment indicated that the property was assessed for $94,620, which consists of $68,000 for the building and $26,620 for the land. The building had been empty for six months and needed considerable maintenance work before it could be used The following costs were incurred in 2020 before the company moved into the building on September 30: former owner's unpaid property taxes on the property for the previous year, $830; current year's (2020) taxes, $620; reshingling of root $1.840; cost of hauling refuse out of the basement, $150, cost of spray-cleaning the outside walls and washing windows, Imeldale $2010 wdinvamental fire and liability insurance for 15 months startine September 30 4. 5. $1,840; cost of hauling refuse out of the basement, $150; cost of spray-cleaning the outside walls and washing windows, $465; cost of painting inside walls, $2,910, and incremental fire and liability insurance for 15 months starting September 30, $530. (Use Prepaid Expenses account for current year tax) The company repaired the plumbing system in its factory for $34,680. The original plumbing costs were not known. On June 30, the company replaced a freezer with a new one that cost $19,570 cash (fair value of $20,580 for the new freezer less trade-in value of the old freezer). The cost of the old freezer was $15,000. At the beginning of the year, the company had depreciated 60% of the old freezer, that is, 10% per year of use The company painted the factory exterior at a cost of $11,570. 6. 7. (The tables in this problem are to be used as a reference for this problem) Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Prepare the journal entries to record the acquisitions and/or costs incurred in the above transactions. In the case of present value calculations, use any of the three methods (PV tables, financial calculator, or Excel functions). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter o for the amounts. Do not round intermediate calculations. Round final answers to decimal places, eg, 1,575) Nn Account Titles and Explanation Debit Credit No. Account Titles and Explanation Debit Credit 1. 2. (To record purchase of equipment) (To record repairs and maintenance expense) 3. (To record purchase of equipment) (To record repairs and maintenance expense) 3. 5. 5. (To record depreciation expense) (To record purchase of equipment with trade-in) 7
