Homework SourseAllocation of Package Purchase Price and Depreciation Method
Allocation of Package Purchase Price and Depreciation Methods
To expand its business, Small Company paid $554,000 for most of the property, plant, and equipment of a small trucking company that was going out of business. Before agreeing to the price, Small hired a consultant for $6,000 to appraise the assets. The appraised values were as follows:
Small issued two checks totaling $560,000 to acquire the assets and pay the consultant on July 1. Small depreciated the assets using the straight-line method on the building and on the equipment, and the double-declining balance method on the trucks. Estimated useful lives and salvage values were as follows:
a. Calculate the amounts allocated to the various types of plant assets acquired on July 1.
b. Prepare the July 1 journal entries to record the purchase of the assets and the payment to the consultant.
c. Prepare the December 31 journal entries to record depreciation expense for the year on the building, trucks, and equipment. (Round to the nearest dollar.)
| Property | Assessed Value |
|---|---|
| Land | $90,000 |
| Building | 330,000 |
| Trucks | 108,000 |
| Equipment | 72,000 |
| Total | $600,000 |
Solution
Workings:
Dear Student,
Best effort has been made to give quality and correct answer. But if you find any issues please comment your concern. I will definitely resolve your query.
| Total Cost | $ 560,000.00 | ||
| Property | Assessed Value | Allocation % | Allocated Value |
| Land | $ 90,000.00 | 15% | $ 84,000.00 |
| Building | $ 330,000.00 | 55% | $ 308,000.00 |
| Trucks | $ 108,000.00 | 18% | $ 100,800.00 |
| Equipment | $ 72,000.00 | 12% | $ 67,200.00 |
| Total | $ 600,000.00 |
