Page 444 - Accounting Principles (A Business Perspective)

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Cash paid to construction company for new building 288,000
Repair damage done by vandals 7,200
Sprinkler system for lawn 31,200
Lighting system for parking lot 40,800
Paving of parking lot 60,000
Net invoice price of machinery 1,152,000
Freight cost incurred on machinery 50,400
Installation and testing of machinery 19,200
Medical bill paid for employee injured in installing machinery 3,600
Landscaping (permanent) 38,400
Repair damage to building in installation of machinery 4,800
Special assessment paid to city for water mains and sewer line 45,600
Account balance $2,106,000
In addition, you discover that cash receipts of USD 1,200 from selling materials salvaged from the old building
were credited to Miscellaneous Revenues in 2009. Digging deeper, you find that the plant manager spent all of his
time for the first nine months of 2009 supervising installation of land improvements (10 per cent), building
construction (40 per cent), and installation of machinery (50 per cent). The plant manager's nine-month salary of
USD 108,000 was debited to Officers' Salaries Expense.
a. List all items on a form containing columns for Land, Land Improvements, Building, and Machinery. Sort the
items into the appropriate columns, omitting those items not properly included as an element of asset cost. Show

negative amounts in parentheses. Total your columns.
b. Prepare one compound journal entry to reclassify and adjust the accounts and to eliminate the Fixed Assets
account. Do not attempt to record depreciation for the partial year.
Alternate problem E Land Company acquired and put into use a machine on 2009 January 1, at a cash cost
of USD 120,000 and immediately spent USD 5,000 to install it. The machine had an estimated useful life of eight
years and an estimated salvage value of USD 15,000 at the end of this time. It was further estimated that the
machine would produce 500,000 units of product during its life. In the first year, the machine produced 100,000
units.
Prepare journal entries to record depreciation to the nearest dollar for 2009, using:

a. Straight-line method.
b. Units-of-production method.
c. Double-declining-balance method.
Alternate problem F Crawford Company paid USD 60,000 for a machine on 2009 April 1, and placed it in
use on that same date. The machine has an estimated life of 10 years and an estimated salvage value of USD 10,000.
Compute the amount of depreciation to the nearest dollar the company should record on this asset for the years
ending 2009 December 31, and 2010, under each of the following methods:

a. Straight-line.
b. Double-declining-balance.
Beyond the numbers—Critical thinking
Business decision case A You are a new staff auditor assigned to audit Cray Company's Buildings account.
You determine that Cray Company made the following entries in its Buildings account in 2009:
Debits
2009
Jan. 2 Cost of land and old buildings purchased $ 720,000
2 Legal fees incident to purchase 9,600
2 Fee for title search 1,200
12 Cost of demolishing old buildings on land 19,200
June 16 Cost of insurance during construction of new building 4,800

Accounting Principles: A Business Perspective 445 A Global Text