Question 3-Long-Term Assets This question consists of two independent parts: A and B. For all requirements in Parts A and B, do not use abbreviations and skip a line between journal entries. PART A Durham Bike Shop Ltd. specializes in selling and repairing a wide variety of bicycles. Some of the company's cash transactions during 2011 follow. The Company's fiscal year ends on December 31. March 1 Paid $220,000 cash to purchase the following assets: Market Estimated Useful Life Estimated Residual Value Asset Value Land Building $ 88,000 132,000 25 years $14,000 The Company plans to use the straight-line depreciation method for the building. April 15 Purchased a used pickup truck for $20,500. The truck is expected to be used for five years and driven 120,000 kilometers. Its estimated salvage value is $3,900. April 16 Installed heavy-duty racks costing $1,400 that will enable the truck to carry several bicycles. The truck was then immediately placed into service. June 30 Paid John's garage for an oil change ($35) and the replacement of a muffler ($165). Required (Show all your calculations): 1. Apportion (allocate) the total purchase price to Land and Building based on their relative market values. Show your computations. 2. Prepare journal entries to record the above transactions (March 1 to June 30). 3. Which depreciation method should the Company use to depreciate the truck? Briefly justify your answer. 4. Prepare adjusting journal entries on December 31, 2011 to record depreciation on the long- lived assets. Assume that the Company uses the units-of-production method to depreciate the truck, which was driven 9,000 kilometers since it was placed into service. PART B Winningham Company sold a machine on April 1, 2012 for $24,000. The machine was purchased on January 1, 2010 for $60,000. It is expected to have a residual value of $3,000 at the end of its useful life of five years. The Company uses the double-declining balance method to depreciate the machine. Required: Prepare the journal entries required to record depreciation for 2012 and the sale of the machine on April 1, 2012. The Company has recorded depreciation properly on this machine up to December 31, 2011