Page 442 - Accounting Principles (A Business Perspective)

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Debits
2009
May 5 Cost of land and building purchased $200,000
5 Broker fees incident to purchase of land and building 12,000
2010
Jan. 3 Contract price of new wing added to south end 84,000
15 Cost of new machinery, estimated life 10 years 160,000
June 10 Real estate taxes for six months ended 2010/6/30 3,600
Aug. 10 Cost of building parking lot for employees in back of building 4,960
Sept. 6 Replacement of windows broken in August 160
Oct. 10 Repairs due to regular usage 2,240
Credits
2009
May 24 Transfer to Land account, per allocation of purchase cost
authorized in minutes of board of directors 32,000
2010
Jan. 5 Proceeds from leases of second floor for six months ended
2009/12/31 8,000
Peach acquired the original property on 2009 May 5. Orange immediately engaged a contractor to construct a
new wing on the south end of the building. While the new wing was being constructed, the company leased the
second floor as temporary warehouse space to Kellett Company. During this period (July 1 to 2009 December 31),

the company installed new machinery costing USD 160,000 on the first floor of the building. Regular operations
began on 2010 January 2.
a. Compute the correct balance for the Buildings account as of 2010 December 31. The company employs a
calendar-year accounting period.
b. Prepare the necessary journal entries to correct the records of Peach Company at 2010 December 31. No
depreciation entries are required.
Problem E Cardine Company acquired and placed into use equipment on 2009 January 2, at a cash cost of
USD 935,000. Transportation charges amounted to USD 7,500, and installation and testing costs totaled USD
55,000.

The equipment was estimated to have a useful life of nine years and a salvage value of USD 37,500 at the end of
its life. It was further estimated that the equipment would be used in the production of 1,920,000 units of product
during its life. During 2009, 426,000 units of product were produced.
Compute the depreciation to the nearest dollar for the year ended December 31, using:
a. Straight-line method.
b. Units-of-production method.
c. Double-declining-balance method (use a fraction rather than a percentage).

Problem F Goodrich Company purchased a machine on 2009 October 1 for USD 100,000. The machine has an
estimated salvage value of USD 30,000 and an estimated useful life of eight years.
Compute to the nearest dollar the amount of depreciation Goodrich should record on the machine for the years
ending 2009 December 31, and 2010, under each of the following methods:

Accounting Principles: A Business Perspective 443 A Global Text