Question

P9-2A. Allocation of package purchase price and depreciation methods

To expand its business, Renee Company paid $760,000 for most of the property, plant, and equipment of a small trucking company that was going out of business. Before agreeing to price, small hired a consultant for $10,000 to appraise the assets. The appraised value were as follows:

Land...................................................................................................................$120,000

Building.................................................................................................................$440,000

Trucks..................................................................................................................$144,000

Equipment.............................................................................................................$96,000

Total....................................................................................................................$800,000

Small Issued two checks totaling $770,000 to acquire the assets and pay the consultant on July 1. Renee depreciated the assets using the straight-line method on the building and on the equipment, and the double-declining balance method on trucks. Estimated useful lives and salvage values were as follows:

  Useful Life  Salvage Value

Building....................................................20 years $42,000

Trucks.......................................................4 years 15,000

Equipment..........................................................8 years 10,000

Required

a. Calculate the amounts allocated to the various types of plant assets acquired on July 1.

b. Prepare the July 1, journal entries to record the purchase of the assets and the payment to the consultant.

c. Prepare the December 31, journal entries to record depreciation expense for the year on the building, trucks, and equipment.

P9-2A. Allocation of package purchase price and depreciation methods To expand its business, Renee Company paid $760,000 for most of the property,...
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