Homework 9 Fixed Assets 1) On May 1, 2020 Chomps Inc. Purchases land and a building for a lump sum purchase price of $1,200.000 The appraised value of the land is $350,000 and the appraised value of the building is $650,000 Allocate the purchase price between the land and the building Asset Appraisal value % of total value Allocated Cost Land 350,000 35 420,000 Building 650,000 65 780,000 Total 1,000,000 1,200,000 2) Chomps expects the land and building to be used in operations (to generate revenue) for 25 years, at which time they estimate the value of the building will be $0 and the land will be $500,000. Using the straightline method, what is annual depreciation expense on the Building? 31.200 Using the straight line method, what is annual depreciation expense on the Land? 208,800 Prepare the journal entry to record the first vear's depreciation expense. DR: Depreciation 20,800 CR: Building 20800 What is the Net Book Value of the Building as of May 1, 2025? 624,000 What is the Net Book Value of the Land as of May 1, 2050? Homework 9 Fixed Assets 3) On May 1, 2020, Chomps buys a piece of equipment for $75,000 They expect to use the equipment to generate revenue for 6 years, at which time they believe we can sell the equipment for $3,000. Using Straight Line, what is annual depreciation expense on the equipment? 5333.33 Using units of the production and the estimated levels of production below, prepare a depreciation schedule for the Equipment. Year Expected Units of Production Beginning Book Value Depreciation Expense Ending Book Value 1 50,000 75,000 5,333 69,667 2 70,000 69,667 8,000 61,667 3 55,000 61,667 8,000 53,667 65,000 53,667 8,000 45,667 5 80,000 45,667 8,000 37,667 6 40,000 37,667 8,000 29,667 Homework 9 Fixed Assets 4) On May 1, 2022, Chomps changes their estimate and believes they can only produce another 200,000 units before the Equipment is sold for $3,000. Using Units of Production, what is the new depreciation rate? Using units of the production and the estimated levels of production below, prepare an adjusted depreciation schedule for the remaining life of the Equipment. Year Expected Units of Production Beginning Book Value Depreciation Expense Ending Book Value 1 50,000 2 70,000 55,000 4 52,000 5 48,000 6 45,000 Homework 9 Fixed Assets 5) On May 1, 2020, Chomps purchases a vehicle for $50,000. We estimate the vehicle has a 5 year useful life and zero salvage value. What is the annual Depreciation Expense using Straight Line? 10000 Using the Straight Line method, prepare a depreciation schedule for the vehicle. Year Beginning Book Value Depreciation Expense Ending Book Value 1 50,000 6,667 43,333 2 43,333 10,000 33,333 3 33,333 10,000 22,222 4 22,222 10,000 11,111 5 11.111 10.000 1.111 6) On May 1, 2023, Chomps sells the vehicle for $10,000 cash. What is the Accumulated Depreciation as of the Date of Sale? 30000 What is the Net Book Value as of the Date of Sale? 20000 What is the gain or loss on the sale? 10000 Loss Prepare the journal entry to record the sale. Dr Cash 10000 Dr Loss on Sale of Vehicle 10000 Cr Vehicle 20000