Fixed Asset and Depreciation Schedule For Fiscal Years Ended September 30, 2017, and September 30, 2018 Depreciation for Year Ended 9/30 Estimated Acquisition Date Depreciation Method Assets Cost Residual Life in Years 2017 2018 Land A 10/1/16 N/A N/A N/A N/A N/A 2$ 13,000 Building A 10/1/16 $42,000 SL Land B 10/2/16 N/A N/A N/A N/A N/A Building B Donated Equipment 10/2/16 Under construction 110,000 to date SL 30 1,000 150% Declining balance 10 Machine A 10/2/16 6,300 Sum-of-the years'-digits 10 Machine B 10/1/17 SL 15
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2016. The accounting department of Thompson has started the fixed-asset and
- Depreciation is computed from the first of the month of acquisition to the first of the month of disposition.
- Land A and Building A were acquired from a predecessor corporation. Thompson paid $712,500 for the land and building together. At the time of acquisition, the land had a fair value of $96,000 and the building had a fair value of $704,000.
- Land B was acquired on October 2, 2016, in exchange for 2,000 newly issued shares of Thompson’s common stock. At the date of acquisition, the stock had a par value of $5 per share and a fair value of $15 per share. During October 2016, Thompson paid $9,400 to demolish an existing building on this land so it could construct a new building.
- Construction of Building B on the newly acquired land began on October 1, 2017. By September 30, 2018, Thompson had paid $110,000 of the estimated total construction costs of $200,000. Estimated completion and occupancy are July 2019.
- Certain equipment was donated to the corporation by the city. An independent appraisal of the equipment when donated placed the fair value at $12,000 and the residual value at $1,000.
- Machine A’s total cost of $101,000 includes installation charges of $450 and normal repairs and maintenance of $10,000. Residual value is estimated at $6,300. Machine A was sold on February 1, 2018.
- On October 1, 2017, Machine B was acquired with a down payment of $3,000 and the remaining payments to be made in 10 annual installments of $3,000 each beginning October 1, 2018. The prevailing interest rate was 7%.Required:
Supply the correct amount for each answer box on the schedule. (Round your final answers to nearest whole dollar.)
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