Financial Accounting Questions

Q1. In Jan.1 2011, Dream Resort pays $1,350,000 for a piece of land with two buildings (Building A and B) and land improvements near Building E (Land Improvements B). It plans to demolish Building A and build a new building in its place. Building B will be a company office; it is appraised at $472,770, with a useful life of 15 years and a $90,000 residual value. Land Improvements B valued at $125,145 are expected to last another six years with no residual value. The land alone was appraised at $792,585. The company also incurs the following additional costs. [Additional costs]

Cost to demolish Building A - $ 117,000

Surveying fee for the land - $ 172,500

Compute the cost of land that needs to be journalized.

Q2. On Jan. 1, 2012, Cool Bakery purchases a baking oven for $4,000 and readies it for use the next day at a cost of $255 for installation. Management estimates the machine will be used for ?ve years and have $1,255 salvage value. On Dec 31, 2013 at the end of its second year of use, the machine is disposed of.

a) Using the straight-line method, journalize the annual depreciation expense on December 31 2012.

b) Now assume that the company uses the double-declining-balance method. Prepare journal entries to record the machine's disposal on Dec. 31 2013 under each of the following separate assumptions: (a) it is sold for $1,500 cash; and (b) it is sold for $1,600 cash.

Q3. Caleb Co. owns a machine that costs $21,200 with accumulated depreciation of $9,200. Caleb exchanges the machine for a newer model that has a market value of $26,000. Record the exchange assuming Caleb also paid cash of (1) $12,000 and the exchange has commercial substance, and (2) $15,000 and the exchange does NOT have commercial substance.