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You are engaged in the examination of the financial statements for Luke Ltd for the current year ended December 3 1 . The analysis that
You are engaged in the examination of the financial statements for Luke Ltd for the current year ended December The analysis that follows for tangible capital assets and related accumulated amortization was prepared by the client. You have verified the opening balances to your prior year's working paper file.
Your examination reveals the following information:
All plant and equipment were depreciated on the straightline basis no residual value taken into consideration using the following estimated lives: buildings, years; all other items, years. The company's policy was to take onehalf year's depreciation on all asset acquisitions and disposals during the year.
On April the company entered into a year lease contract for a diecasting machine with annual rentals of $ payable in advance every April The lease could be cancelled by either party days written notice is required and there was no option to renew the lease or buy the equipment at the end of the lease. The estimated useful life of the machine was years with no residual value. The company recorded the diecasting machine in the Machinery and Equipment account at $ the present discounted value at the date of the lease, and $ applicable to the machine, was included in amortization expense for the year. Hint: Leases with these conditions should not be capitalized nor should a liability be recognized.
The company completed the construction of a wing on the plant building on June of the current year. The usefui life of the building was not extended by this addition. The lowest construction bid received was $ the amount recorded in the Buildings account. Company personnel constructed the addition at a cost of $materials $; labour, $; and overhead, $ The $ difference was credited to an account called Gain on SelfConstruction of Building Addition.
On August $ was paid for paving and fencing a portion of land owned by the company to be used as a parking lot for the employees. The expenditure was charged to the Land account.
The amount shown in the machinery and equipment asset retirement column represents cash received on September regarding disposal of a machine purchased in July, years ago, for $ The bookkeeper recorded amortization expense of $ on this machine in the current year.
The city of Moose Jaw donated land and a building appraised at $ and $ respectively to Luke Ltd for a plant. On September the company began operating the plant. Because the company paid nothing for these assets, the bookkeeper made no entry to record the transaction.
LUKE LTD
Analysis of Capital Assets and Related Accumulated Amortization Accounts Current Year Ended December
Capital Assets
tableDescriptiontableFinalOpeningAdditions,Retirements,tablePer BooksBefore ClosingLand$$$
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