1. Milton Company purchased land and an office building on September 1 for a combined cash price of $2,200,000. The land had a cost of $1,300,000 and the building had a book value of $1,030,000 on the seller’s books. The land and building had fair market values of $1,400,000 and $800,000, respectively on September 1.

 

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Milan made the following entry at acquisition:

 

Land ……………………………………………………….. 1,300,000

Building …………………………………………………… 1,700,000

Gain on Purchase ………………………………………… 130,000

Accumulated Depreciation ……………………………… 670,000

Cash …………………………………………………………………………. 2,200,000

 

Prepare the correct entry for the acquisition.

 

2. Neville Company bought machinery on January 1, 2010 at a cost of $400,000. The machinery had an estimated life of 8 years and salvage value of $20,000. In January 2013, Neville estimates that the machinery will have a life of only 4 more years and an $18,000 salvage value. Norton uses straight-line depreciation. Compute the revised annual depreciation.

 

3. Carley Company bought equipment on April 1, 2012 at a total cost of $220,000. The equipment has an estimated useful life of 4 years and salvage value of $40,000.  Farley uses the double-declining-balance method of depreciation. Compute depreciation for 2012 and 2013.

 

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