Reference no: EM133109405
Question - JFG Ltd completed the following transactions during 2022:
July 5 Purchased land (which contained an old shed) in the industrial estate at a cost of $750,000. The company also incurred title search fees of $2,750 and agent's commission of $15,000.
July 15 Paid $53,000 for the demolition of the old shed and the site levelled and prepped for construction of new premises. Engaged a builder and discussed architectural plans for the new building. Paid $27,000 to the builder for plans and permits for the new building.
Nov 1 Received the final invoice from the builder for $1,300,000 being the balance owing on the construction of the new premises. Paid this final invoice. The company moved into the new premises on 1 November. It is estimated the building will have a $550,000 residual value and a useful life of 30 years.
The building will be depreciated using the straight-line method of depreciation.
Nov 1 Purchased office equipment $215,000 and new computer system $78,000.
The office equipment will be depreciated using straight-line depreciation. It is expected the office equipment will have a useful life of 10 years and $15,000 residual balance.
The computer system will be depreciated using the diminishing balance method of accounting for depreciation. Due to advances in technology, it is estimated the computer system will need to be updated in 3 years and will have a residual value of $8,000.
Nov. 15 The company's parking area was concreted at a cost of $93,000. A further $72,000 was spent on landscaping and fencing. The parking area has a useful life of 15 years with no residual value. The land improvements will be depreciated using straight-line depreciation.
Dec. 15 Purchased new equipment for $120,000 cash. JFG Ltd incurred $5,000 in freight costs to have the equipment delivered and a further $2,500 for installation. The equipment is expected to have a useful life of 10 years and a residual value of $5,000. JFG Ltd will depreciate this asset using the diminishing balance method.
Required -
a. Prepare journal entries to record all the transactions of JFG Ltd from 1 July 2022 to 30 June 2023 as noted above.
b. Prepare journal entries to record depreciation as at 30 June 2023 (please tell all calculations).