On July 1, 2020, Martinez Ltd., a publicly listed company, acquired assets from Marigold Ltd. On the transaction date, a reliable, independent valuator assessed the fair values of these assets as follows: Manufacturing plant (building #1) $399,620 Storage warehouse (building #2) 209,860 Machinery (in building #1) 75,000 Machinery (in building #2) 45,000 The buildings are owned by the company, and the land that the buildings are situated on is owned by the local municipality and is provided free of charge to the owner of the buildings to encourage local employment. In exchange for the acquisition of these assets, Martinez issued 145,530 common shares. Martinez’s shares are thinly traded (that is, traded in relatively low volume leading to more volatile price changes than most public companies). In the most recent sale of Martinez’s shares on the Toronto Stock Exchange, 800 shares were sold for $5 per share. At the time of acquisition, both buildings were considered to have an expected remaining useful life of 10 years, the machinery in building #1 was expected to have a remaining useful life of 3 years, and the machinery in building #2 was expected to have a useful life of 9 years. Martinez uses straight-line depreciation with no residual values. At December 31, 2020, Martinez’s fiscal year end, Martinez recorded the correct depreciation amounts for the six months that the assets were in use. An independent appraisal concluded that the assets had the following fair values: Manufacturing plant (building #1) $387,600 Storage warehouse (building #2) 178,600 At December 31, 2021, Martinez once again retained an independent appraiser and determined that the fair value of the assets was: Manufacturing plant (building #1) $340,000 Storage warehouse (building #2) 160,950 Prepare the journal entries required for 2020 and 2021, assuming that the buildings are accounted for under the revaluation model (using the asset adjustment method), and that the machinery is accounted for under the cost model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record the amounts for Building #1 and #2 and for Machinery seperately. Do not combine these amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit July 1, 2020 Dec. 31, 2020 (To record depreciation on Building #1) Dec. 31, 2020 (To record depreciation on Building #2) Dec. 31, 2020 (To record depreciation on Machinery in Building #1) Dec. 31, 2020 (To record depreciation on Machinery in Building #2) Dec. 31, 2020 (To revalue manufacturing plant – (Building #1)) Dec. 31, 2020 (To revalue storage warehouse – (Building #2))

On July 1, 2020, Martinez Ltd., a publicly listed company, acquired assets from Marigold Ltd. On the transaction date, a reliable, independent valuator assessed the fair values of these assets as follows: Manufacturing plant (building #1) $399,620 Storage warehouse (building #2) 209,860 Machinery (in building #1) 75,000 Machinery (in building #2) 45,000 The buildings are owned by the company, and the land that the buildings are situated on is owned by the local municipality and is provided free of charge to the owner of the buildings to encourage local employment. In exchange for the acquisition of these assets, Martinez issued 145,530 common shares. Martinez’s shares are thinly traded (that is, traded in relatively low volume leading to more volatile price changes than most public companies). In the most recent sale of Martinez’s shares on the Toronto Stock Exchange, 800 shares were sold for $5 per share. At the time of acquisition, both buildings were considered to have an expected remaining useful life of 10 years, the machinery in building #1 was expected to have a remaining useful life of 3 years, and the machinery in building #2 was expected to have a useful life of 9 years. Martinez uses straight-line depreciation with no residual values. At December 31, 2020, Martinez’s fiscal year end, Martinez recorded the correct depreciation amounts for the six months that the assets were in use. An independent appraisal concluded that the assets had the following fair values: Manufacturing plant (building #1) $387,600 Storage warehouse (building #2) 178,600 At December 31, 2021, Martinez once again retained an independent appraiser and determined that the fair value of the assets was: Manufacturing plant (building #1) $340,000 Storage warehouse (building #2) 160,950 Prepare the journal entries required for 2020 and 2021, assuming that the buildings are accounted for under the revaluation model (using the asset adjustment method), and that the machinery is accounted for under the cost model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record the amounts for Building #1 and #2 and for Machinery seperately. Do not combine these amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit July 1, 2020 Dec. 31, 2020 (To record depreciation on Building #1) Dec. 31, 2020 (To record depreciation on Building #2) Dec. 31, 2020 (To record depreciation on Machinery in Building #1) Dec. 31, 2020 (To record depreciation on Machinery in Building #2) Dec. 31, 2020 (To revalue manufacturing plant – (Building #1)) Dec. 31, 2020 (To revalue storage warehouse – (Building #2))

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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Manufacturing plant (building #1)		$399,620
Storage warehouse (building #2)		209,860
Machinery (in building #1)		75,000
Machinery (in building #2)		45,000

The buildings are owned by the company, and the land that the buildings are situated on is owned by the local municipality and is provided free of charge to the owner of the buildings to encourage local employment.

In exchange for the acquisition of these assets, Martinez issued 145,530 common shares. Martinez’s shares are thinly traded (that is, traded in relatively low volume leading to more volatile price changes than most public companies). In the most recent sale of Martinez’s shares on the Toronto Stock Exchange, 800 shares were sold for $5 per share. At the time of acquisition, both buildings were considered to have an expected remaining useful life of 10 years, the machinery in building #1 was expected to have a remaining useful life of 3 years, and the machinery in building #2 was expected to have a useful life of 9 years. Martinez uses straight-line depreciation with no residual values.

At December 31, 2020, Martinez’s fiscal year end, Martinez recorded the correct depreciation amounts for the six months that the assets were in use. An independent appraisal concluded that the assets had the following fair values:

Manufacturing plant (building #1)		$387,600
Storage warehouse (building #2)		178,600

At December 31, 2021, Martinez once again retained an independent appraiser and determined that the fair value of the assets was:

Manufacturing plant (building #1)		$340,000
Storage warehouse (building #2)		160,950

Prepare the journal entries required for 2020 and 2021, assuming that the buildings are accounted for under the revaluation model (using the asset adjustment method), and that the machinery is accounted for under the cost model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record the amounts for Building #1 and #2 and for Machinery seperately. Do not combine these amounts. Round answers to 0 decimal places, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
July 1, 2020




Dec. 31, 2020

	(To record depreciation on Building #1)
Dec. 31, 2020

	(To record depreciation on Building #2)
Dec. 31, 2020

	(To record depreciation on Machinery in Building #1)
Dec. 31, 2020

	(To record depreciation on Machinery in Building #2)
Dec. 31, 2020


	(To revalue manufacturing plant – (Building #1))
Dec. 31, 2020


	(To revalue storage warehouse – (Building #2))

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