n January 1, 2015, Wanja Lim

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On January 1, 2015, Wanja Limited (which has a Dec 31st year end) purchased the assets of Kong Limited
for $ 2,000,000. It was a cash transaction for which Wanja secured a bank loan. Kong’s assets included
land, buildings and equipment. Land was appraised for $1,000,000, buildings $2,000,000 and Equipment
$1,000,000. Buildings have an estimated useful life of 20 years while equipment has an estimated life of 10
years and no residual value.

a) Do the complete journal entry to record the above transaction in the books of Wanja Limited

 

b) On January 1st, 2019, a major improvement was made to the Equipment costing $200,000. As a result,
the production capacity doubled, but its expected life remained unchanged. On 31st March 2019 Wanja
limited paid Joy limited for repairs and maintenance services of the equipment for $72,000. On December
31st equipment depreciation for 2019 is recorded. Do the complete journal entry to record these transactions
in the books of Wanja Limited. 

 

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why do you divide the land, building and equipment by 2?

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how did you get the Equipment depreciation expense

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