Financial and Managerial Accounting (Looseleaf) (Custom Package)
Financial and Managerial Accounting (Looseleaf) (Custom Package)
6th Edition
ISBN: 9781259754883
Author: Wild
Publisher: MCG
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Chapter 8, Problem 3PSB

1.

To determine

To prepare:

A table and to allocate the cost.

1.

Expert Solution
Check Mark

Explanation of Solution

Prepare table to show allocation of cost:

Details Land
($)
Building 2
($)
Building 3
($)
Land Improvement B
($)
Land Improvement C
($)
Purchase Price 868,000 527,000   155,000  
Demolition 122,200        
Land grading 174,500        
New Building     1,458,000    
New Improvement         103,500
Total 1,164,500 527,000 1,458,000 155,000 103,500

Table (1)

Working Notes:

Computation of total appraised value:

Totalappraisedvalue=(Appraisedvalueofland+AppraisedValueofBuilding+AppraisedvalueofLandimprovement1)=$795,200+$482,400+$142,000=$1,420,000.

Total appraised value is $1,420,000.

Land

Computation of percentage of land of the total appraised value:

Percentageofland=AppraisedvalueoflandTotalappraisedvalue×100=$795,200$1,420,000×100=52%

Percentage of land is 52%.

Apportioned cost

Computation of apportioned cost:

Apportionedcost=Cashactuallypaid×Percentageofland=$1,550,000×52%=$868,000

Apportioned cost of land is $868,000.

Building B

Computation of percentage of building of the total appraised value:

Percentageofbuilding=AppraisedvalueofbuildingTotalappraisedvalue×100=$482,800$1,420,000×100=34%

Percentage of building is 34%.

Apportioned cost

Apportionedcost=Cashactuallypaid×Percentageofbuilding=$1,550,000×23%=$527,000

Apportioned cost of building is $527,000.

Land improvements B

Computation of percentage of land improvements 1 of the total appraised value:

PercentageoflandimprovementB=(AppraisedvalueoflandimprovementBTotalappraisedvalue ×100)=$142,000$1,420,000×100=10%

Percentage of land improvement B is 10%.

Apportioned cost

Computation of apportioned cost:

Apportionedcost=Cashactuallypaid×PercentageoflandimprovementB=$1,550,000×10%=$155,000

Apportioned cost of land improvement B is $155,000.

2.

To determine

To prepare:

Journal Entry.

2.

Expert Solution
Check Mark

Explanation of Solution

Record the entry for purchase of assets.

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Land   1,164,500  
  Building B   527,000  
  Building C   1,458,000  
  Land improvements B   155,000  
  Land improvements C   103,500  
  Cash     3,408,000
  (To record the purchase of assets)      

Table (2)

• Building is an asset account. Building account increases as the new building has been purchased. Hence, Building account is debited.

• Land is an asset account. Land account increases as a new land is purchased and all the assets are debited as a new asset is purchased or if its value increases.

• Vehicle account is an asset account. Vehicles account increases as a new vehicle is purchased and all the assets are debited as a new asset is purchased or if its value increases.

• Land improvements are an asset account. Land improvement account increases as some improvements have been done on land to increase its useful life and all the assets are debited as their value increases.

• Cash account is an asset account. Cash account decreases as the amount paid for the purchase of all assets are made in cash and all the assets are credited as their values decreases.

3.

To determine

To prepare:

adjusting entries.

3.

Expert Solution
Check Mark

Explanation of Solution

Building B

Record depreciation on building B.

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
Dec 31 2015 Depreciation   28,500  
  Accumulated Depreciation     28,500
  (To record the depreciation)      

Table (3)

• Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.

• Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of depreciation:

Depreciation=(CostoftheassetResidualvalue)Usefullife=$527,000$99,50015=$28,500

Depreciation that will charge to building is $26,900.

Building C

Record depreciation on building C.

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
Dec 31 2015 Depreciation   60,000  
  Accumulated Depreciation     60,000
  (To record the depreciation)      

Table (4)

• Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.

• Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of depreciation:

Depreciation=(CostoftheassetResidualvalue)Usefullife=$1,458,000$258,00020=$60,000

Depreciation that will charge to building C is $60,000.

Land improvement B

To record entry for depreciation on Land improvement 1,

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Depreciation   31,000  
  Accumulated Depreciation     31,000
  (To record the depreciation)      

Table (5)

• Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.

• Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of depreciation:

Depreciation=(CostoftheassetResidualvalue)Usefullife=$155,0005=$31,000

Depreciation charged to improvement B is $31,000.

Land improvement C

To record depreciation on Land improvement 2,

Date Account Title and Explanation Post ref Debit
($)
Credit
($)
  Depreciation   10,350  
  Accumulated Depreciation     10,350
  (To record the depreciation)      

Table (6)

• Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.

• Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of depreciation:

Depreciation=(CostoftheassetResidualvalue)Usefullife=$103,50010=$10,350

Depreciation that will charge to improvement C is $10,350.

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Chapter 8 Solutions

Financial and Managerial Accounting (Looseleaf) (Custom Package)

Ch. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQCh. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 21DQCh. 8 - Prob. 1QSCh. 8 - Prob. 2QSCh. 8 - Prob. 3QSCh. 8 - Prob. 4QSCh. 8 - Prob. 5QSCh. 8 - Prob. 6QSCh. 8 - Prob. 7QSCh. 8 - Prob. 8QSCh. 8 - Prob. 9QSCh. 8 - Prob. 10QSCh. 8 - Prob. 11QSCh. 8 - Prob. 12QSCh. 8 - Prob. 13QSCh. 8 - Prob. 14QSCh. 8 - Prob. 15QSCh. 8 - Prob. 1ECh. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Prob. 7ECh. 8 - Prob. 8ECh. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Prob. 14ECh. 8 - Prob. 15ECh. 8 - Prob. 16ECh. 8 - Prob. 17ECh. 8 - Prob. 18ECh. 8 - Prob. 19ECh. 8 - Prob. 20ECh. 8 - Prob. 21ECh. 8 - Prob. 22ECh. 8 - Prob. 23ECh. 8 - Prob. 24ECh. 8 - Prob. 25ECh. 8 - PROBLEM SET A Problem 81A Plant asset costs;...Ch. 8 - Prob. 2PSACh. 8 - Prob. 3PSACh. 8 - Prob. 4PSACh. 8 - Prob. 5PSACh. 8 - Prob. 6PSACh. 8 - Prob. 7PSACh. 8 - Prob. 8PSACh. 8 - Prob. 1PSBCh. 8 - Prob. 2PSBCh. 8 - Prob. 3PSBCh. 8 - Prob. 4PSBCh. 8 - Prob. 5PSBCh. 8 - Prob. 6PSBCh. 8 - Prob. 7PSBCh. 8 - Prob. 8PSBCh. 8 - Prob. 8SPCh. 8 - Prob. 1BTNCh. 8 - Prob. 2BTNCh. 8 - Prob. 3BTNCh. 8 - Prob. 4BTNCh. 8 - Prob. 5BTNCh. 8 - Prob. 6BTNCh. 8 - Prob. 7BTNCh. 8 - GOOGLE Google Inc. CONSOLIDATED BALANCE SHEETS (In...Ch. 8 - Prob. 9BTN
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Depreciation -MACRS; Author: Ronald Moy, Ph.D., CFA, CFP;https://www.youtube.com/watch?v=jsf7NCnkAmk;License: Standard Youtube License