Allocation of Package Purchase Price and Depreciation Methods To expand its business, Small Company paid $954,000 for most of the property, plant, and equipment of a small trucking company that was going out of business. Before agreeing to the price, Small hired a consultant for $6,000 to appraise the assets. The appraised values were as follows: Property AssessedValue Land $150,000 Building 550,000 Trucks 180,000 Equipment 120,000 Total $1,000,000 Small issued two checks totaling $960,000 to acquire the assets and pay the consultant on July 1. Small depreciated the assets using the straight-line method on the building and on the equipment, and the double-declining balance method on the trucks. Estimated useful lives and salvage values were as follows: Useful Life SalvageValue Building 20 years $42,000 Trucks 4 years 15,000 Equipment 7 years 10,000 a. Calculate the amounts allocated to the various types of plant assets acquired on July 1. Asset Total Land Answer Building Answer Trucks Answer Equipment Answer b. Prepare the July 1 journal entries to record the purchase of the assets and the payment to the consultant. Combine both cash disbursements into one journal entry. General Journal Date Description Debit Credit Jul.1 Land Answer Answer Building Answer Answer Trucks Answer Answer Equipment Answer Answer Cash Answer Answer To record purchase of plant assets and payment to consultant. c. Prepare the December 31 journal entries to record depreciation expense for the year on the building, trucks, and equipment. (Round to the nearest dollar.) General Journal Date Description Debit Credit Dec. 31 AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer To record depreciation on building. Dec. 31 AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer To record depreciation on trucks. Dec. 31 AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer To record depreciation on equipment.

Allocation of Package Purchase Price and Depreciation Methods To expand its business, Small Company paid $954,000 for most of the property, plant, and equipment of a small trucking company that was going out of business. Before agreeing to the price, Small hired a consultant for $6,000 to appraise the assets. The appraised values were as follows: Property AssessedValue Land $150,000 Building 550,000 Trucks 180,000 Equipment 120,000 Total $1,000,000 Small issued two checks totaling $960,000 to acquire the assets and pay the consultant on July 1. Small depreciated the assets using the straight-line method on the building and on the equipment, and the double-declining balance method on the trucks. Estimated useful lives and salvage values were as follows: Useful Life SalvageValue Building 20 years $42,000 Trucks 4 years 15,000 Equipment 7 years 10,000 a. Calculate the amounts allocated to the various types of plant assets acquired on July 1. Asset Total Land Answer Building Answer Trucks Answer Equipment Answer b. Prepare the July 1 journal entries to record the purchase of the assets and the payment to the consultant. Combine both cash disbursements into one journal entry. General Journal Date Description Debit Credit Jul.1 Land Answer Answer Building Answer Answer Trucks Answer Answer Equipment Answer Answer Cash Answer Answer To record purchase of plant assets and payment to consultant. c. Prepare the December 31 journal entries to record depreciation expense for the year on the building, trucks, and equipment. (Round to the nearest dollar.) General Journal Date Description Debit Credit Dec. 31 AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer To record depreciation on building. Dec. 31 AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer To record depreciation on trucks. Dec. 31 AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks Answer Answer To record depreciation on equipment.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Allocation of Package Purchase Price and Depreciation Methods

To expand its business, Small Company paid $954,000 for most of the property, plant, and equipment of a small trucking company that was going out of business. Before agreeing to the price, Small hired a consultant for $6,000 to appraise the assets. The appraised values were as follows:

Property	Assessed Value
Land	$150,000
Building	550,000
Trucks	180,000
Equipment	120,000
Total	$1,000,000

Small issued two checks totaling $960,000 to acquire the assets and pay the consultant on July 1. Small depreciated the assets using the straight-line method on the building and on the equipment, and the double-declining balance method on the trucks. Estimated useful lives and salvage values were as follows:

	Useful Life	Salvage Value
Building	20 years	$42,000
Trucks	4 years	15,000
Equipment	7 years	10,000

a. Calculate the amounts allocated to the various types of plant assets acquired on July 1.

Asset	Total
Land	Answer
Building	Answer
Trucks	Answer
Equipment	Answer

b. Prepare the July 1 journal entries to record the purchase of the assets and the payment to the consultant. Combine both cash disbursements into one journal entry.

General Journal
Date	Description	Debit	Credit
Jul.1	Land	Answer	Answer
	Building	Answer	Answer
	Trucks	Answer	Answer
	Equipment	Answer	Answer
	Cash	Answer	Answer
	To record purchase of plant assets and payment to consultant.

c. Prepare the December 31 journal entries to record depreciation expense for the year on the building, trucks, and equipment. (Round to the nearest dollar.)

General Journal
Date	Description	Debit	Credit
Dec. 31	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	To record depreciation on building.
Dec. 31	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	To record depreciation on trucks.
Dec. 31	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	AnswerAccumulated Depreciation - BuildingAccumulated Depreciation - EquipmentAccumulated Depreciation - TrucksBuildingDepreciation Expense - BuildingDepreciation Expense - EquipmentDepreciation Expense - TrucksEquipmentLandTrucks	Answer	Answer
	To record depreciation on equipment.

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