Answer the following: 1. How much should be recorded as cost of Land, Building and Machinery? 2. Assuming that the Building will be depreciated over 10 years with no salvage value, how much should be the annual depreciation expense? 3. Assume that the company will use unit-of production method for the depreciation of machinery. The estimated total production is 1000.000 units with the following production for the next 5 years of its life: 30%, 35%, 20% 10%, 5%, respectively each year. The machine has no salvage value. What will be the depreciation expense for the third year?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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A company made the following expenditures in connection with the construction of a new building:
Architect's fees
100,000
14,400,000
Cash paid for land and unusable building on the land
Construction costs of new building
48,000,000
Construction survey
50,000
Excavation for basement construction
1,200,000
76,800
Freight on machinery purchased
Installation of machinery
Legal fees for title search
Machinery purchased for operations
Removal of old building
Salvage from sale of old building materials
120,000
144,000
4,800,000
864,000
(192,000)
Special base for the machinery
10,000
Answer the following:
1. How much should be recorded as cost of Land, Building and Machinery?
2. Assuming that the Building will be depreciated over 10 years with no salvage value, how much should be
the annual depreciation expense?
3. Assume that the company will use unit-of production method for the depreciation of machinery. The
estimated total production is 1000.000 units with the following production for the next 5 years of its life:
30%, 35%, 20% 10%, 5%, respectively each year. The machine has no salvage value. What will be the
depreciation expense for the third year?
Transcribed Image Text:A company made the following expenditures in connection with the construction of a new building: Architect's fees 100,000 14,400,000 Cash paid for land and unusable building on the land Construction costs of new building 48,000,000 Construction survey 50,000 Excavation for basement construction 1,200,000 76,800 Freight on machinery purchased Installation of machinery Legal fees for title search Machinery purchased for operations Removal of old building Salvage from sale of old building materials 120,000 144,000 4,800,000 864,000 (192,000) Special base for the machinery 10,000 Answer the following: 1. How much should be recorded as cost of Land, Building and Machinery? 2. Assuming that the Building will be depreciated over 10 years with no salvage value, how much should be the annual depreciation expense? 3. Assume that the company will use unit-of production method for the depreciation of machinery. The estimated total production is 1000.000 units with the following production for the next 5 years of its life: 30%, 35%, 20% 10%, 5%, respectively each year. The machine has no salvage value. What will be the depreciation expense for the third year?
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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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