PragmaTech (PT) recycles plastic and then sells it to manufacturing companies to produce toys, household items (such as coffee makers), and so on. PT was founded in 1998 by Joseph DAngelo. Joe has maintained full ownership of PT, deciding not to take it public when so many other recycling companies were going public. While Joe is the only shareholder, PT does have a substantial bank loan and the bank requires an annual audit of PTs financial statements and PT follows ASPE. Joe has a background in operations but is also very strong in accounting.

It is now early 2022 and you are the controller for PT, having been hired just days before the December 31, 2021, year end. In October 2021, Joe decided to step away from the business and spend more time at his second home in South Carolina. In order to ensure there was someone at the PT facility to oversee production and day-to-day operations, Joe hired a chief operating officer, Robert Fancy. Robs background is sales and operations, and he has limited knowledge of accounting. Rob tried to run the accounting side of PT when he was hired but determined that it wasnt his area of strength. He received Joes permission to hire you to help him with accounting for some of the activities in preparation for year end, and to help him understand the accounting function better.

Comment what is happening in each scenario and provide journal entries if necessary.

During 2021, PT purchased a parcel of land with a building on it across the street from its current location. The purchase price was $450,000 for the land and the building. PT intends to build a new production warehouse on the land and has demolished the old building on it. The cost of demolishing the building was $20,000 and PT was able to recoup $8,000 of these costs by selling the scrap to a recycler. Rob is unsure of how this should be accounted for and has asked you to provide the journal entry with support. PT also purchased new equipment on November 1,2021 . The equipment cost $125,000. In addition, PT had to pay $5,000 in shipping fees to have the equipment delivered and $8,000 to have a cement pad poured for the installation of equipment. Rob believes there was $15,000 of labour downtime as a result of the installation. The equipment has an expected salvage value of $8,000 and it is standard PT practice to depreciate equipment of this type using the same method that would be used for tax purposes. Rob has asked you to set up the equipment on the books at the total cost of $153,000 and record the depreciation for the year end. Rob came to you and wanted to know why the land across the street that was purchased in 2021 could not be recorded at the estimated fair value of $800,000. "Since we purchased that land, prices have skyrocketed in the area. Just yesterday, I had a call from a casino developer asking if they could buy it for $780,000. I think we could easily get $800,000 for it, but Joe doesn't want to sell it. I think we should record it at what we could get for it. What do you think