Problem 10-7A

Prepare journal entries to record the machine's purchase and the costs to ready and install it. Cash is paid for all costs incurred. Prepare journal entries to record depreciation of the machine at December 31 of (a) its first year in operations and (b) the year of its disposal. Prepare journal entries to record the machine's disposal under each of the following separate assumptions: (a) it is sold for $15,000 cash; (b) it is sold for $50,000 cash; and (c) it is destroyed in a fire and the insurance company pays $30,000 cash to settle the loss claim. On July 23 of the current year, Dakota Mining Co. pays $4, 715,000 for land estimated to contain 5, 125,000 tons of recoverable ore. It installs machinery costing $410,000 that has a 10-year life and no salvage value and is capable of mining the ore deposit in eight years. The machinery is paid for on July 25, seven days before mining operations begin. The company removes and sells 480,000 tons of ore during its first five months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined. Prepare entries to record (a) the purchase of the land, (b) the cost and installation of machinery, (c) the first five month's depletion assuming the land has a net salvage value of zero after the ore is mined, and (d) the first five months' depreciation on the machinery. Describe both the similarities and differences in amortization, depletion, and depreciation. On July 1, 2010, Falk Company signed a contract to lease space in a building for 15 years. The lease contract calls for annual (prepaid) rental payments of $80,000 on each July 1 throughout the life of lease and for the lessee to pay for all additions and improvements to the leased property. On June 25, 2015, Falk decides to sublease the space to Ryan & Associates for the remaining 10 years of the lease- Ryan pays $200,000 to Falk for the right to sublease and it agrees to assume the obligation to pay the $80,000 annual rent to the building owner beginning July 1, 2015. After taking possession of the leased space, Ryan pays for improving the office portion of the leased space at a $130,000 cost