ACC 226
Axia College of University of Phoenix (UoP)
Financial Accounting
Larson, K. D., Wild, J. J., & Chiappetta B. (2005). Fundamental accounting principles (17th ed.)
ACC 226 Solution
Help in ACC 226
Problem 10-1A (P10-1A) Xavier Construction negotiates a lump-sum purchase of several assets from a company that is going out of business. The purchase is completed on January 1, 2005, at a total cash price of $787,500 for a building, land, land improvements, and six vehicles. The estimated market values of the assets are building, $408,000; land, $289,000; land improvements, $42,500; and four vehicles, $110,500. The company’s fiscal year ends on December 31.
Required
1. Prepare a table to allocate the lump-sum purchase price to the separate assets purchased (round percents to the nearest 1%). Prepare the journal entry to record the purchase.
2. Compute the depreciation expense for year 2005 on the building using the straight-line method, assuming a 15-year life and a $25,650 salvage value.
3. Compute the depreciation expense for year 2005 on the land improvements assuming a five-year life and double-declining-balance depreciation.
Analysis Component
4. Defend or refute this statement: Accelerated depreciation results in payment of less taxes over the asset’s life.
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