Question One

Papa Biemba Co Ltd purchased land adjacent to its plant to improve access for trucks making deliveries. Expenditures incurred in purchasing the land were as follows: purchase price to be paid a month later, K55,000; and all other cost paid in cash included, brokers fees, K6,000; title search and other fees, K5,000; demolition of an old building on the property, K5,700; grading, K1,200; digging foundation for the road, K3,000; laying and paving driveway, K25,000; lighting K7,500; signs, K1,500.

Required:

1. What items would be included to the cost of land and how will it be
2. Pass the journal entries to record the land Purchase

Question Two

Equipment was acquired on January 1, 2017, at a cost of K75,000. The equipment was originally estimated to have a salvage value of K5,000 and an estimated life of 10 years. Depreciation has been recorded through December 31, 2020, using the Double Declining Balance Method. On January 1, 2021, the estimated salvage value was revised to K7,000 and the useful life was revised to a total of 8 years.

Required:

1. Calculate the book value at the time of the revision (January 1, 2021).
2. Pass the journal entry for the depreciation in 2021.