End of Chapter Problem 14.15

End of Chapter Problem 14.15 On 2 January 2018, Powerhouse Ltd purchased, by exchanging $240,000 cash and a $144,000, 12%, 18-month finance company loan, assets with the following independently determined appraised values: Building Land Appraised value $320,000 80,000 100,000 $500,000 Machinery and equipment The estimated useful life of the building is 30 years and its residual value is $16,000. The $100,000 machinery and equipment amount consists of three machines independently valued at $30,000 each and some office equipment valued at $10,000. The estimated useful lives and residual values for these assets are: Useful life Residual value Machine 1 6 years Machine 2 9 years $3,600 3,600 4,800 Machine 3 4 years Office equipment 5 years 400 Powerhouse Ltd uses the straight-line depreciation method. Ignore GST. A. Prepare journal entries (in general journal form) to record the following. (Enter all debit entries first, followed by all credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.) 1. The purchase of the assets. Powerhouse Ltd General journal (extract) Date Particulars Debit Credit 2018 Jan. 2 Building Land Machinery Office equipment Cash at bank Loan from finance company (To record purchase of various assets) 2. The accrual of interest expense on the loan on 31 December 2018. Powerhouse Ltd General journal (extract) Date Particulars Debit Credit 2018 Dec. 31 Interest expense Interest payable (To record annual interest. Not a qualifying asset) 3. Depreciation expense for the year 2018. Powerhouse Ltd General journal (extract) Date Particulars Debit Credit 2018 Dec. 31 Depreciation expense Accumulated depreciation building Accumulated depreciation machinery Accumulated depreciation office equipment (To record annual depreciation) 4. The payment of the loan on 2 July 2019. Powerhouse Ltd General journal (extract) Date Particulars Debit Credit 2019 July 2 Interest expense Interest payable Loan from finance company Cash at bank (To record repayment of loan plus interest)