Reference no: EM132966108

Machinery that cost $192,000 on 1 January 20X1 was sold for $72,000 on 30 June 20X6. It was being depreciated over a 10 year life by the straight line method, assuming its residual value would be $12,000. A building that cost $1,700,000, residual value $100,000, was being depreciated over 20 years by the straight line method. At the beginning of 20X6, when the structure was 8 years old, an additional wing component was constructed at a cost of $500,000. The estimated life of the wing considered separately was 15 years, and its residual value was expected to be $20,000. The accounting period ends 31 December.

Required:

Problem 1. Give all entries to record:

a. Sale of the equipment, including depreciation to date of sale
b. The addition to the building: cash was paid
c. Depreciation on the building and its addition after the latter has been in use for one year.

Problem 2. Show how the building and attached wing would be reported on a balance sheet prepared immediately after entry 1c was recorded.