Problem #4

Solve the following unrelated short problems:

Part I

KSR Corp. purchased a large piece of factory equipment for $950,000 on January 1, 2014. KSR uses straight line depreciation and originally estimated the equipment to have a useful life of 15 years and that it would be worth $50,000 at the end of its useful life. Depreciation has been recorded through the end of calendar year 2017. In January 2018, it is determined that the original total estimated life should have been 10 years with a salvage value of $80,000 at the end of that time.

Required (Show all calculations)

Prepare the entry for depreciation of the equipment for 2018.

Part II

Simpson and Homer Corporation acquired an office building on three acres of land for a lump-sum price of $2,400,000. The building was completely furnished. According to independent appraisals, the fair values were $1,300,000, $780,000, and $520,000 for the building, land, and furnishings, respectively.

Required (Show all calculations)

Prepare the journal entry to record the purchase of the building, land and furnishings.