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Following your explanation Jim thinks he can see how depreciation works and has made the following suggestions about depreciating Paul's new assets. a. PVTU -
Following your explanation Jim thinks he can see how depreciation works and has made the following suggestions about depreciating Paul's new assets. a. PVTU - The matting for the pit is rated for 10,000 jumps, 30 Jim has suggested using the units of use method with a scrap value estimated at $5,500. Paul has also confirmed 800 jumps have been performed since the PVTU was purchased. b. Accounts Receivable - Jim thinks these should be collected in the next 6 months and will have no residual value and so should be depreciated using the straight-line method over that period. c. Store Inventory - The inventory will need to be replaced if not all sold in 3 years and will have not scrap value at that point. Jim suggests the straight-line method over those three years. d. Fixtures and Fittings - These items have a useful life of 8 years and will have a residual value of $3000, 30 the straight-line method will work well. e. Training Equipment - The training equipment will need to be replaced in just under 2 years and so Jim has worked out a reducing balance rate of 60% f. Land and Buildings - Straight line depreciation is most commonly used for buildings. The building is relatively new and should be in good condition for another 25 years at which time it could be sold for $200,000. While Jim has done a pretty good job you've already noticed that some of Jim's suggestions won't work. Paul has also asked how the building could be sold for $200,000 in 25 years when it is currently valued at only a little more than that. Jim indicated that he had an appraisal done and the land is currently worth $130,000 but is expected to increase in value in the future, while it is predicted the buil reduce in value by $3,000 per year. Paul mentioned to you in private that he only plans in staying in the building for the next 10 years so is not sure why Jim was talking about a 25 year plan. Required 2. Identify for Jim which of the assets can be depreciated using the methods he has suggested and then for those assets that can be depreciated record the joumal entries to depreciate all of the assets the business currently controls on June 30. Calculations Energising Athletes Making the Leap - General Journal DATE PARTICULARS PR DEBIT S CREDIT S
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