Dale Brewery is a craft brewery located in Oshawa Ontario. In May 2017, Dale Brewery acquired new equipment that will be used in his flagship store. Details of his purchase are as follows:

Dale paid the following for the equipment: -

Equipment $375,000

- Delivery $3,000

- Training for staff: $10,000

- Staff party to celebrate the new brewery opening: $3,500

- Equipment set-up & installation: $30,000

- Advertisements in a local paper: $1,100

Part 1 Capitalization vs. Expense

a) Prepare the journal entries to record the above purchases.

b) Why might a company prefer to classify items as assets, rather expensing them?

Part 2 Depreciation

Dale Brewery is contemplating the method of depreciation for this new equipment. The equipment has a useful life of four years and will produce approximately 110,000 kegs of beer in its life.

c) Assuming that the company uses the units of production method of depreciation. Prepare the journal entries assuming that the following number of kegs were produced in 2017, 2018 and 2019. - 2017: 15,000 kegs - 2018: 31,000 kegs

d) Explain why a company may choose to use the units of production method of depreciation, rather than using the straight-line method for calculating depreciation?