Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem On January 1, 20x1, Elsey Inc. purchased some land for $250,000 and paid related closing legal costs of $2,000. The land had an old

image text in transcribed
Problem On January 1, 20x1, Elsey Inc. purchased some land for $250,000 and paid related closing legal costs of $2,000. The land had an old warchouse on it that was immediately torn down at a cost of S5,000, which was partly paid for by selling salvage metal from the warehouse for $1,400. Elsey paid an architect $20,000 to design its new head office building and paid a contractor $400,000 to build the new head office. The new head office was completed and available for use on October 1, 20x1. Elsey also paid $400 per month in property insurance from January 1, 20x1, to December 31, 20x1, to cover the risk of fire or flood damage during construction and occupancy a. Allocate the costs incurred in 20xI to land, building, and or expense. b. Calculate the amount of depreciation to be charged on the building in 20x1 and 20x2, assuming the building has an expected useful life of 23 years with a residual value of $30,000. Elsey would like you to do your calculations under the following two scenarios: straight-line depreciation, and diminishing balance depreciation at a rate of 8%. ii) c Assume that the diminishing balance method is used. On December 31, 20x13, Elsey sells the land and building for $400,000. Prepare the journal entry to record the sale. Assume that depreciation expense for the year ended December 31, 20x13 has been recorded. Problem2 On May 1, 20x3, Cara Inc, acquired land and a building for its new head office at a cost of $840,000. Cara was pleased because the land and the building had appraised values of 300,000 and $700,000, respectively, Additional costs associated with the acquisition included legal fees of $4,000 and back taxes owing on the property of S6,000. Orn December 31,20x3, Cara also paid $2,500 to repair the building's furnace. The building has an expected useful life of 20 years with no residual value, and Cara uses straight-line depreciation for its capital assets. Reqired- Prepare the jourmal entries to record the acquisition of the land and the building on May 1, 20x3 and all journal entries related to the land and the building on December 31, 20x3 On July 1, 20x3, Cara was offered $900,000 for its land and building and decided to sell them and move to a less expensive location. Prepare all journal entries required in 20x5 relating to the land and building. a. b

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Information Technology Control And Audit

Authors: Angel R. Otero

5th Edition

1498752284, 9781498752282

More Books

Students also viewed these Accounting questions

Question

=+Does it showcase the firm's benefits?

Answered: 1 week ago

Question

=+ Does it list exciting places to go and famous sites to see?

Answered: 1 week ago