On July1, 2022, Pepperpot Company made a lump sum purchase of an office building, including the land and some fixtures, for cash of $550,000. The tax assessments for the past year reflected the following: Land, $48,000; Building, $168,000; and Fixtures, $24,000. Pepperpot believes they will use the building for another 20 years at which time they expect to sell it of $45,000. The fixtures only have a five year life and Pepperpot expects they will have a residual value of $2,000 when they are sold. Pepperpot depreciates their real estate holdings on a straight line basis. All fixtures are depreciated using declining balance method. a. Prepare the journal entry to record the acquisition. Show your work. b. Prepare any year end adjustments required. c. Show how the assets will be presented on the December 31, 2022 financial statements.
On July1, 2022, Pepperpot Company made a lump sum purchase of an office building, including the land and some fixtures, for cash of $550,000. The tax assessments for the past year reflected the following: Land, $48,000; Building, $168,000; and Fixtures, $24,000. Pepperpot believes they will use the building for another 20 years at which time they expect to sell it of $45,000. The fixtures only have a five year life and Pepperpot expects they will have a residual value of $2,000 when they are sold. Pepperpot
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