Financial Accounting: P10-1A Xavier Construction negotiates a lump-sum purchase of several assets

Financial Accounting

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, 2011, at a total cash price of $787,500 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $408,00; land, $289,00; land improvements, $42,500; and four vehicles, $110,500. The company's fiscal year ends December 31.

Requirements:
1. Prepare a table to allocate the lump-sum purchase price to the separate assets purchased (round percents to nearest 1%). Prepare the jounal entry to record the purchase.accounts receivables method.
2. Compute the depreciation expense for year 2011 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 2011 on the land improvements assuming a 5 year life and double-declining-balance depreciation.
4. Defend or refute this statement: Accelerated depreciation results in payment of less taxes over the asset's life.
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