Page 441 - Accounting Principles (A Business Perspective)

10. Property, plant, and equipment

After considerable negotiation, the company and the owner reached the following agreement: Pressler Company
was to pay USD 216,000 in cash, assume a USD 90,000 mortgage note on the property, assume the interest of USD
1,920 accrued on the mortgage note, and assume unpaid property taxes of USD 13,200. Pressler Company paid

USD 18,000 cash for brokerage and legal services in acquiring the property.
Shortly after acquisition of the property, Pressler Company sold the fruit on the trees for USD 2,640, remodeled
the building into an office building at a cost of USD 38,400, and removed the trees from the land at a cost of USD
9,000. Construction of the factory building was to begin in a week.
Prepare schedules showing the proper valuation of the assets acquired by Pressler Company.
Problem C Timothy Company acquired and placed into use a heavy factory machine on 2009 October 1. The
machine had an invoice price of USD 360,000, but the company received a 3 per cent cash discount by paying the

bill on the date of acquisition. An employee of Timothy Company hauled the machine down a city street without a
permit. As a result, the company had to pay a USD 1,500 fine. Installation and testing costs totaled USD 35,800.
The machine is estimated to have a USD 35,000 salvage value and a seven-year useful life. (A fraction should be
used for the DDB calculation rather than a percentage.)
a. Prepare the journal entry to record the acquisition of the machine.
b. Prepare the journal entry to record depreciation for 2009 under the double-declining balance method.
c. Assume Timothy Company used the straight-line depreciation method. At the beginning of 2009, it estimated
the machine will last another six years. Prepare the journal entry to record depreciation for 2009. The estimated
salvage value would not change.

Problem D Peach Company has the following entries in its Building account:

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