PLANT ASSETS AND DEPRECIATION METHODS

PROBLEM: Century Company negotiated a lump-sum purchase of several assets from a contractor who was retiring. The purchase was completed on January 1 of the current year, at a total cash price of $1,500,000 for a building, land improvements, and five trucks. The estimated market value of the assets are:

Building $890,000;

Land $427,200;

Land improvements $249,200;

and five trucks $213,600. The company's fiscal year ends December 31.

REQUIREMENTS:

1. What is the lump-sum cost allocation? Journal entries to record this PURCHASES.

2.-Using the Straight-line method; The Declining balance method, and The sum of the Years digit method calculate the ANNUAL DEPRECIATION FOR THE BUILDING over the life of this asset. Assume a 12 years life and a $120,000 salvage value. (Acquisition historic cost - Estimated life in years - Estimated Salvage value)

Show Journal entries using each method for the first two years on the general ledger.

3.- Show the annual depreciation on the FIVE TRUCKS using:

Straight line method, ( Accounting period - created formula showing the Depreciation Expense).

The declining balance method (Accounting period - Current book value - Depreciation Rate, Depreciation Expense, with a manually created formula).

The sum-of-the-years digits methods. ( Accounting period - Depreciation Expense).

Assume a 5-year life and a salvage value of $3,000 each, or $15,000. The company uses the composite method for simplicity for all trucks. This means you will calculate the total just one time for all five trucks together.

 Create a math formula to solve for depreciation.

 Journal entries with each method.

4.- Annual depreciation of the LAND IMPROVEMENTS using the Straight-line method only. Assume a 10 years life and no salvage value. Create a manual formula.

Thanks for your help and please, show all required steps along with your calculations to understand this project.

NOTE: This is all the information given in the text book.*