Reference no: EM132672581

You were hired by Charlie Company during 2019 as their new Accountant. The following were discovered by you at the end of the year 2019.

1. On December 24, 2019, Charlie purchased office equipment for 400,000, terms 2/10, n/15. No entry was made on the date of purchase. The same was paid on December 31, 2019 and the former accountant debited Office Equipment and credited Cash for 392,000.

2. Machine C, with a cash price of 128,000, was purchased on January 2, 2019. The company paid 20,000 down and 10,000 for 12 months. The last payment was made on December 30, 2019. Straight line depreciation based on a 5-year useful life and no salvage value was recorded at 28,000 for the year. Freight of 4,000 on Machine C was debited to the Freight in account

3. Machine P with a cash selling prices of 360,000 was acquired on April 1, 2019 in exchange for 400,000 face amount of bonds payable selling at 94, and maturing on April 1, 2029. The accountant recorded acquisition by a
debit to Machinery and a credit to Bonds Payable for 400,000. Straight line Depreciation was recorded based on a 5-year economic life and amounted to 54,000 for nine months. In the computation of depreciation, residual value of 40,000 was used.

4. Machine A was acquired on January 22, 2019, in exchange for past due accounts receivable of 140,000 on which allowance of 20% was established at the end of 2018. The current fair value of the machine on January 22 was estimated at 110,000. The machine was recorded by a debit to Machinery and a credit to Accounts Receivable for 140,000. No depreciation was recorded on Machine A because it was not installed and never used in operations. On February 2, 2019, Machine A was exchanged for 1,000 shares of the company's outstanding share capital with market price of 105 per share. The Treasury stock account was debited for 140,000 with a corresponding credit to Machinery.

5. On December 29, 2019, the company exchanged 10,000 shares of Lulu, Inc. common stock, which Charlie was holding as an investment, for an equipment from Faye Corporation. The common stock of Lulu, Inc., which had been purchased by Charlie for 45 per share, had a quoted market value of 50 per share on the date of exchange the equipment had a market value of 470,000. The transaction was recorded by a debit to Equipment and a credit to
Investment in Lulu, Inc. for 450,000

6. On December 30, 2019, Machine M with a carrying amount of 120,000 (Cost 400,000) was exchanged for a similar asset with a fair value of 150,000. In addition, Charlie paid 20,000 to acquire the new machine. The exchange, which lacks commercial substance, was recorded by a debit to
Machinery and a credit to cash for 20,000

7. Machine E was recorded at 102,000 which included the carrying amount of 22,000 for an old machine accepted as trade in, and cash of 80,000. The cash price of Machine S. was 90,000 and the trade in allowance was 10,000. This transaction took place on December 31, 2019.

8. Ms. Rosella, the company's president, donated land and building appraised at 200,000 and 400,000 respectively, to the company to be used as a plant site. The company began operating the plant on September 30, 2019. The building is estimated to have a useful life of 25 years. Since no money was involved, no journal entry was made.

9. On July 1, 2018, the national government granted a parcel of land located in Beluga, Blanca to Charlie. On the date of grant, the land had a value of 2,000,000. The grant required Charlie to construct a cold storage building on the site. Charlie finished the construction, which has an estimated useful life of 25 years, on January 2, 2019. Charlie appropriately recorded the cost of building of 4,000,000 but failed to record depreciation in 2019. Unaware if the accounting procedures for government grants, the company did not reflect the grant on its books.

Required:

Problem 1: Compute the initial carrying amount of the PPE for each item, i.e., 1 to 9