PLANT ASSETS:
Instructions: Complete the requirements specified for each of the following independent situations.
Question 1: Maddox Company purchased land and a modern office building on March 1 for a combined cash price of $800,000. The land had a cost of $470,000 and the building had a book value of $100,000 on the seller's books. The land and building had fair market values of $520,000 and $280,000, respectively on March 1. Maddox made the following entry at acquisition:
Land 470,000
Building 500,000
Gain on Purchase 70,000
Accumulated Depreciation 100,000
Cash 800,000
Prepare the correct entry for the acquisition.
Question 2: Norton Company bought machinery on January 1, 2001 at a cost of $150,000. The machinery had an estimated life of 10 years and salvage value of $15,000. In January, 2004, Norton estimates that the machinery will have a life of only 5 more years and an $18,000 salvage value. Norton uses straight-line depreciation. Compute the revised annual depreciation for 2004.
Question 3: Gwynn Company bought equipment on July 1, 2001 at a total cost of $400,000. The equipment has an estimated useful life of 5 years and salvage value of $80,000. Gwynn uses the double-declining-balance method of depreciation. Compute depreciation for 2001 and 2002. The company is on the calendar year.