Estimating completion and occupancy

Assignment Help Accounting Basics

Reference no: EM132079866

Question: The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2014. The accounting department of Thompson has started the fixed-asset and depreciation schedule presented below. You have been asked to assist in completing this schedule. In addition to ascertaining that the data already on the schedule are correct, you have obtained the following information from the company's records and personnel (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

a. Depreciation is computed from the first of the month of acquisition to the first of the month of disposition.

b. Land A and Building A were acquired from a predecessor corporation. Thompson paid $822,500 for the land and building together. At the time of acquisition, the land had a fair value of $91,000 and the building had a fair value of $819,000.

c. Land B was acquired on October 2, 2014, in exchange for 3,100 newly issued shares of Thompson's common stock. At the date of acquisition, the stock had a par value of $5 per share and a fair value of $26 per share. During October 2014, Thompson paid $10,500 to demolish an existing building on this land so it could construct a new building.

d. Construction of Building B on the newly acquired land began on October 1, 2015. By September 30, 2016, Thompson had paid $220,000 of the estimated total construction costs of $310,000. Estimated completion and occupancy are July 2017.

e. Certain equipment was donated to the corporation by the city. An independent appraisal of the equipment when donated placed the fair value at $16,400 and the residual value at $2,100.

f. Machine A's total cost of $111,000 includes installation charges of $560 and normal repairs and maintenance of $11,000. Residual value is estimated at $5,500. Machine A was sold on February 1, 2016.

g. On October 1, 2015, Machine B was acquired with a down payment of $4,100 and the remaining payments to be made in 10 annual installments of $4,100 each beginning October 1, 2016. The prevailing interest rate was 9%.

Reference no: EM132079866

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