Chapter 10, Problem 3APSA

To determine

Concept Introduction:

Journal entry is recording of all accounting transaction in a chronological order.

Straight line depreciation is a method of depreciation in which asset is depreciated over its useful life constantly. In this method depreciated is calculated by dividing cost of asset less salvage value by useful life of an asset.

Double declining method of depreciation is a method of depreciation in which rate is doubled according to the useful life of an asset.

Requirement 1:

We have to determine the total of all asset mentioned.

Answer to Problem 3APSA

Particulars	Land	Building 2	Building 3	Land improvements 1	Land improvements 2
Totals	$2,115,800	598,000	2202,000	390,000	164,000

.

Explanation of Solution

Allocation of purchase price	Appraised value	Percent of Total appraised value	x	Total cost of acquisition	=	Apportioned cost
Land	1,736,000	62%		2,600,000		1612,000
Building2	644,000	23%		2,600,000		598,000
Land improvement 1	420,000	15%		2,600,000		390,000
Total	28,00,000	100%				$2,600,000

Particulars	Land	Building 2	Building 3	Land improvements 1	Land improvements 2
Purchase price	1,612,000	598,000	0	390,000	0
Demolition	328,400
Land grading	175,400
New building (construction)	0	0	2202,000	0	0
New improvement cost					164,000
Totals	$2,115,800	598,000	2202,000	390,000	164,000

In the above table, the appraised value of total assets is 2,800,000. We have calculated the percentage of total assets in proportion to appraised value. Thereafter, the value $2,600,000 has been apportioned in the ratio of appraised value of individual assets. After calculating individual value, the additional costs have been added to the apportioned acquisition value of respective individual asset and total value of asset has been derived.

To determine

Concept Introduction:

Journal entry is recording of all accounting transaction in a chronological order.

Straight line depreciation is a method of depreciation in which asset is depreciated over its useful life constantly. In this method depreciated is calculated by dividing cost of asset less salvage value by useful life of an asset.

Double declining method of depreciation is a method of depreciation in which rate is doubled according to the useful life of an asset.

Requirement 2:

We have to determine the journal entry for cash transaction.

Answer to Problem 3APSA

Transaction	Particulars	Amount ($)	Amount($)
1.	Land	2,115,000
	Building 2	598,000
	Building 3	2,202,000
	Land improvements 1	390,000
	Land improvements 2	164,000
	Cash		5469,800
	( to record cash transaction)

.

Explanation of Solution

The above answer can be explained as all asset will be debited and cash account will be credited.

In this case land account, Building 2 &3 and Land improvements 1 & 2 will be debited with their respective amount and cash account will be credited with lumpsum amount.

To determine

Concept Introduction:

Journal entry is recording of all accounting transaction in a chronological order.

Straight line depreciation is a method of depreciation in which asset is depreciated over its useful life constantly. In this method depreciated is calculated by dividing cost of asset less salvage value by useful life of an asset.

Double declining method of depreciation is a method of depreciation in which rate is doubled according to the useful life of an asset.

Requirement 3:

We have to determine the journal entry for depreciation asset.

Answer to Problem 3APSA

Transaction	Particulars	Amount ($)	Amount($)
1.	Depreciation expense- building 2	26,900
	Accumulated depreciation − building 2		26,900
	( to record depreciation)
	Depreciation expense- building 3	72,400
	Accumulated depreciation − building 3		72,400
	( to record depreciation)
	Depreciation expense- land improvement 1	32,500
	Accumulated depreciation − land improvement 1		32,500
	( to record depreciation)
	Depreciation expense- land improvement 2	8200
	Accumulated depreciation − land improvement 2		8200
	( to record depreciation)

Explanation of Solution

The above answer can be explained as depreciation will be calculated on asset and depreciation expense on asset will be debited and accumulated depreciation account will be credited.

Depreciation on assets can be calculated as −

$Depreciation=\cos t-salvagevalue/usefullifeofanasset$

Particulars	Formula	Amount
Depreciation expense- building 2	(598,000-60,000)/20	26,900
Depreciation expense- building 3	(2,202,000-392000)/25	72,400
Depreciation expense- land improvement 1	390,000/12	32,500
Depreciation expense- land improvement 2	164,000/20	8,200