Reference no: EM132095693
Problem 1 - P & P Products is relocating its Human Resources department to an unused space closer to the main administration building. The 4,000 square foot space is empty and has not been used in several years. Jane, the VP of Personnel, is overseeing the conversion and relocation of the HR department cf3. P & P Products' maintenance people will perform the move. Jane has asked George, the maintenance foreman, to prepare a list of what needs to be done to make the space ready for occupancy. George provided the following list of tasks. Assume that the labor will be performed by contractors and that the costs below include the labor charges.
1. Painting (the current walls have peeling paint) estimated cost $15,000
2. Replacing the wood floors with tile to increase the life of the space - $34,000
3. Installing wiring for computers - $18,000
4. Installing new modular units for work space - $124,000
5. Removal of old modular units - $12,000.
6. Sale of old modular units - $5,000.
Required: Prepare the potential entry for the items above. Make only one combined entry.
Problem 2 - In addition to the costs outlined in Problem 1, Jane asked the IT department to give her a price list for new computer equipment. The following information was provided: Fourteen new computers with a cost of $140,000, plus an additional $4,000 for freight and 7 percent tax on $140,000. The estimated useful life is 5 years, and the salvage value is 5 percent. The computers are treated as a single unit for financial reporting purposes. Ten existing computers, with a total trade-in value of $10,000, will be traded for the new computers. The computers are treated as a single unit. They have an original cost of $80,000 and a current book value of $8,000. The remaining balance of the new computers will be paid in cash. Additional IT personnel to support the increased workload created by the HR department will cost $200,000 annually. This amount includes fringe benefits and taxes.
Required:
a. Prepare the potential journal entries for the above items. Assume that the exchange is considered to lack commercial substance.
b. Prepare the potential journal entries for the above items. Assume that the exchange is considered to have commercial substance.