Reference no: EM132972481

Your examination of the records of Wilson Ltd, which was established on 1 March 2019, reveals that the accountant debited the Land, Buildings and Equipment account with the following items (ignore GST). Purchase price of land and building $ 650 000 (An independent valuation was obtained, showing land being valued at $600 000 and the building at $80 000) Legal and transfer costs 3 500 Cost of demolition of building 25 000 Earthmoving on property 15 000 Architect's and other professional fees in respect of the erection of new buildings on the property 160 000 Cost of erection of new building 2 100 000 Layout of parking area 75 000 Lighting of parking area 18 000 Cost of machinery and equipment (including $9000 for a machine which was dropped from one of the company's vehicles during off-loading and irreparably damaged) 1 267 000 Installation cost of machinery 85 000 Cost of replacement of damaged machine 9 000 $4 407 500 Examination of the wage records shows that the salary of the manager, $4000 per month, was debited to the Salaries Expense account. From 1 March to 31 August 2019, he supervised the erection of the factory buildings, and from 1 September to 31 October 2019 he supervised the installation of the machinery. The accountant credited sundry income with $8400, being $7000 received for scrap building material from the demolished building and $1400 for the damaged machine. Non-current assets: acquisition and depreciation 659

Required

Problem (a) Show journal entries to transfer the amounts to three different accounts, i.e. Land account, Buildings account and Machinery account.

Problem (b) Assuming that the enterprise started operations on 1 November 2019 and that its financial year ends on 31 March, journalise the following depreciation entries using the straight-line method: i. buildings: useful life 40 years, $20 000 residual value ii. machinery: useful life 12 years and residual value amounting to 10% of cost.