Complete the Journal entries for 12/31/2018

In June of 2018 Bill buys a piece of land with an old building on it. Bill knocks down the old building and builds another bakery with a café and a small warehouse.He also put in a parking lot.The cost of the land was $100,000.He paid $3000 in delinquent real estate taxes and $7000 in attorney’s fees at the closing.The cost to knock down the old building and clear the land was $16,000, but he was able to sell the scrap bricks and lumber for $6,000.The cost to construct the new building was $140,000 and he paid $10,000 to have the parking lot paved and have lights and a fence put up.After the building was completed Bill had an alarm system installed for $2000.Bill purchased furniture and fixtures for $4,000 and was able to buy an oven, refrigerator-freezer and dishwasher for special bundle price of $34,000.The actual fair market values and life and salvage value are listed below: Actual UseEst LifeSalvValueEstUsefulHrs Yr 1 Yr 2 Oven………………….…..$14,000 5 yrs$2,0004,000 3001,000Refrigerator-Freezer…..….$20,000 4 yrs $4,0008,000 1,200 2,400Dishwasher……………….$6,0003 yrs$1,0002,000400 800Bill financed the purchase of the land, construction of the building and equipment by taking out a 15 year mortgage for $250,000 at a rate of 6%.Bill is also ready to replace the equipment at his other location, but is undecided about whether he should buy or lease the equipment.Bill has a friend who is willing to buy the equipment for $7,000.Required:Record journal entries for the transactions associated with the mortgage issued on 06/01/18 and the purchase of the land (07/01/18), building, equipment, parking lot, and furniture and fixtures (10/1/18) Prepare an amortization schedules for the payments on the small business loan and the mortgage Record the payments on the $60,000 loan for the year (may be done as a summary entry) and the first 6 months of mortgage payments (adjust for interest which should be capitalized during construction of building (7/1/18-9/30/18) and accrued interest on 12/31/18 Prepare depreciation schedules for the new assets using straight-line depreciation. Also prepare depreciation schedules using an accelerated and activity based method for he kitchen equipment only.Record journal entries for the depreciation on the old and the equipment using the results of your straight line calculations.Record the sale of the old equipment on 12/31/18Record $700,000 of cash Sales earned and $650,000 operating expenses paid from March to December and close to Retained Earnings along with any other revenue and expenses recorded in your entries.Assume a 5 year life for the furniture and fixtures with no salvage value and the building has a life of 25 years and a salvage value of $50,000. You will have to look up the depreciable life for the parking lot. Use the excel that i gave u, just complete the journal entries for 12/31/2018
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Case 6
General Journal
Account/Description
#
6/1/2018 Cash
Debits
Credits
$
250,000.00
Mortagage Payable
7/1/2018 Land
10/1/2018
7/1/2018
8/1/2018
9/1/2018
10/1/2018
10/1/2018
$
$
posted
250,000
100,000.00
Cash
$
Land
$
26,000.00
Cash
$
to record closings costs and cost to knock down building and clear land
Cash
$
6,000.00
Land
$
to record proceeds from the sale of scrap from old building
Building
$
140,000.00
Land lmprovements
$
10,000.00
Cash
$
Building
$
2,000.00
Cash
$
to record construction of building, paving of lot and alam system added
Building
$
1,250.00
Mortagage Payable
$
850.00
Cash
$
Building
$
1,245.75
Mortagage Payable
$
854.25
Cash
$
Building
$
1,241.48
Mortagage Payable
$
858.52
Cash
$
to record July, August,Sept mortagage payments with interest Capitalized
Interest Expense
$
1,237.19
Mortagage Payable
$
862.81
Cash
$
Furniture&Fixtures
$
4,000.00
Equipment
$
34,000.00
Cash
$
To record purchase of furniture&Fixtures and Equioment
100,000
26,000
6,000
150,000
2,000
2,100
2,100
2,100
2,100
38,000
12/31/2018
(sba loan payments)
(Accrued interest)
Depreciation Expense
Accumulate Dep
(Depreciation exp)
$
7,000.00
$
7,000
(Revenue and Expenses)
Cash
Fum &Equipment-old
Accumulated Dep
Gain or loss on Sale
(sale of assets)
$
7,000.00
$
40,000
Amoritiaztion Schedules
Interest
Payment
7/1/2018
8/1/2018
9/1/2018
10/1/2018
11/1/2018
12/1/2018
Expense
Amount
$ 1,250.00
($2,100)
$ 1,245.75
($2,100)
$ 1,241.48
($2,100)
$ 1,237.19
($2,100)
$ 1,232.87
($2,100)
$ 1,228.54
($2,100)
Principal
Int Rate/mo
$ 250,000.00
0.005
$ 249,150.00
0.005
$ 248,295.75
0.005
$ 247,437.23
0.005
$ 246,574.41
0.005
$ 245,707.29
0.005
Payment
Applied
to Principal
$
(850.00) Interest capitalized
$
(854.25) Interest capitalized
$
(858.52) Interest capitalized
$
(862.81)
$
(867.13)
$
(871.46)
1/1/2019 $ 244,835.82
0.005 $ 1,224.18
($2,100) $
(875.82)
2/1/2019
3/1/2019
4/1/2019
5/1/2019
6/1/2019
7/1/2019
0.005
0.005
0.005
0.005
0.005
0.005
($2,100)
($2,100)
($2,100)
($2,100)
($2,100)
($2,100)
(880.20)
(884.60)
(889.02)
(893.47)
(897.94)
(902.43)
$
$
$
$
$
$
243,960.00
243,079.80
242,195.20
241,306.18
240,412.71
239,514.77
Amoritiaztion Schedules
Payment Principal
Int Rate/mo
1/1/2018
60000 0.006666667
2/1/2018
$58,944.93 0.006666667
3/1/2018
$57,882.82 0.006666667
4/1/2018
$56,813.63 0.006666667
5/1/2018
$55,737.31 0.006666667
6/1/2018
$54,653.82 0.006666667
7/1/2018
$53,563.10 0.006666667
8/1/2018
$52,465.11 0.006666667
9/1/2018
$51,359.81 0.006666667
10/1/2018
$50,247.13 0.006666667
11/1/2018
$49,127.04 0.006666667
12/1/2018
$47,999.47 0.006666667
1/1/2019
$46,864.40 0.006666667
2/1/2019
$45,721.75 0.006666667
3/1/2019
$44,571.49 0.006666667
$
$
$
$
$
$
1,219.80
1,215.40
1,210.98
1,206.53
1,202.06
1,197.57
$
$
$
$
$
$
Interest
Payment
Applied
Expense
Amount
to Principal
400 ($1,455.07)
($1,055.07)
392.966168 ($1,455.07)
($1,062.11)
385.885443 ($1,455.07)
($1,069.19)
378.757514 ($1,455.07)
($1,076.32)
371.582065 ($1,455.07)
($1,083.49)
364.35878 ($1,455.07)
($1,090.72)
357.087339 ($1,455.07)
($1,097.99)
349.767423 ($1,455.07)
($1,105.31)
342.398707 ($1,455.07)
($1,112.68)
334.980866 ($1,455.07)
($1,120.09)
327.513573 ($1,455.07)
($1,127.56)
319.996497 ($1,455.07)
($1,135.08)
312.429309 ($1,455.07)
($1,142.65)
304.811672 ($1,455.07)
($1,150.26)
297.14325 ($1,455.07)
($1,157.93)
ASSETS
Oven
Refingerlor
Dishwasher
Total
$
$
$
$
% OF fmv
14,000
35.0%
20,000
50.0%
6,000
15.0%
40,000
Cost
$
11,900
$
17,000
$
5,100
Depreciation Schedules
Straight Line Depreciation- time based, uniform method,assumes asset is used the same time
Assets:
Oven
Residual
Estimated Depreciation
Accumulated
Year
Cost
Value
Life in Yrs
Expense
Depreciation
2018 $
14,000 $
2,000
5 $
600 $
600
2019 $
14,000 $
2,000
5 $
2,400 $
3,000
2020 $
14,000 $
2,000
5 $
2,400 $
5,400
2021 $
14,000 $
2,000
5 $
2,400 $
7,800
2022 $
14,000 $
2,000
5 $
2,400 $
10,200
2023 $
14,000 $
2,000
5 $
1,800 $
12,000
Refrigerator
Year
2018
2019
2020
2021
2022
Dishwasher
Year
2018
2019
2020
2021
Cost
$
$
$
$
$
Cost
$
$
$
$
Furniture&Fixtures
Year
Cost
2018 $
2019 $
2020 $
2021 $
2022 $
$
BUILDING
Year
Cost
2018 $
2019 $
20,000
20,000
20,000
20,000
20,000
Residual
Estimated
Depreciation
Value
Life in Yrs
Expense
$
4,000
4 $
1,000
$
4,000
4 $
4,000
$
4,000
4 $
4,000
$
4,000
4 $
4,000
$
4,000
4 $
3,000
Accumulated
Depreciation
$
1,000
$
5,000
$
9,000
$
13,000
$
16,000
6,000
6,000
6,000
6,000
Residual
Estimated
Depreciation
Value
Life in Yrs
Expense
$
1,000
3 $
417
$
1,000
3 $
1,667
$
1,000
3 $
1,667
$
1,000
3 $
1,250
Accumulated
Depreciation
$
417
$
2,084
$
3,750
$
5,000
Residual
Value
$
$
$
$
$

Depreciation
Expense
$
200
$
800
$
800
$
800
$
800
$
600
Accumulated
Depreciation
$
200
$
1,000
$
1,800
$
2,600
$
3,400
$
4,000
Residual
Estimated
Depreciation
Value
Life in Yrs
Expense
145,737 $ 50,000
25 $
957
145,737 $ 50,000
25 $
3,829
Accumulated
Depreciation
$
957
$
4,786.48
4,000
4,000
4,000
4,000
4,000
4,000
Estimated
Life in Yrs
5
5
5
5
5
5
2020
2021
2022
2023
Parking Lot
Year
2018
2019
2020
2021
2022
2023
$
$
$
$
Cost
$
$
$
$
$
$
145,737
145,737
145,737
145,737
10,000
10,000
10,000
10,000
10,000
10,000
$
$
$
$
50,000
50,000
50,000
50,000
Residual
Value
$
$
$
$
$
$

25
25
25
25
Estimated
Life in Yrs
$
$
$
$
3,829
3,829
3,829
3,829
Depreciation
Expense
0
0
0
0
0
0
$
$
$
$
8,615.96
12,445
16,275
20,104
Accumulated
Depreciation
0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
Book
Value
$
$
$
$
$
$
13,400
11,000
8,600
6,200
3,800
2,000
Book
Value
$
$
$
$
$
19,000
15,000
11,000
7,000
4,000
Book
Value
$
$
$
$
5,583
3,916
2,250
1,000
Book
Value
$
$
$
$
$
3,800
3,000
2,200
1,400
600
Book
Value
$
144,780
$
140,951
$
$
$
$
137,121
133,292
129,462
125,633
Book
Value
0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
ASSETS
Oven
Refingerlor
Dishwasher
Total
% OF fmv
$
$
$
$
14,000
20,000
6,000
40,000
Cost
35.0% $
11,900
50.0% $
17,000
15.0% $
5,100
Depreciation Schedules
Units of Production-activity, base on the how the asset is actually used, most closely
Assets:
Follow the matching principle,no need to prorate in frist and last year
Oven
Residual
Estimated
Rate per
Depreciation
Year
Cost
Value
Life in Units Unit
Expense
2018 $
14,000 $
2,000
4000
3 $
900
2019 $
14,000 $
2,000
4000
3 $
3,000
Refrigerator
Year
Cost
2018 $
2019 $
Dishwasher
Year
Cost
2018 $
2019 $
Residual
Estimated
Rate per
Value
Life in Yrs
Unit
20,000 $
4,000
8000
20,000 $
4,000
8000
Depreciation
Expense
2 $
2,400
2 $
4,800
Residual
Estimated
Rate per
Depreciation
Value
Life in Yrs
Unit
Expense
6,000 $
1,000
2000
2.5 $
1,000
6,000 $
1,000
2000
2.5 $
2,000
Double Declining Balance Method
More depreciation taken in early years,assume assets is more productive when newer, does not consider residual value
Oven
Accumulated
2*1/est life Depreciation Accumulated
Year
Cost
Depreciation
Expense
Depreciation
2018 $
14,000
0.4 $
1,400 $
1,400
2019 $
14,000 $
1,400
0.4 $
5,040 $
6,440
2020 $
14,000 $
6,440.00
0.4 $
3,024 $
9,464
Refrigerator
Accumulated
2*1/est life Depreciation Accumulated
Year
Cost
Depreciation
Expense
Depreciation
2018 $
20,000
0.5 $
2,500 $
2,500
2019 $
20,000 $
2,500
0.5 $
8,750 $
11,250
2020 $
20,000 $
11,250
0.5 $
4,375 $
15,625
Dishwasher
Accumulated
2*1/est life Depreciation Accumulated
Year
Cost
Depreciation
Expense
Depreciation
2018 $
6,000
0.667 $
1,000 $
1,000
2019 $
6,000 $
1,000
0.667 $
3,333 $
4,333
2020 $
6,000 $
4,333
0.667 $
667 $
5,000
Accumulated
Depreciation
$
900
$
3,900
Book
Value
$
$
13,100
10,100
Accumulated
Depreciation
$
2,400
$
7,200
Book
Value
$
$
17,600
12,800
Accumulated
Depreciation
$
1,000
$
3,000
Book
Value
$
$
5,000
3,000
wer, does not consider residual value
Book
Value
$
12,600
$
7,560
$
4,536
Book
Value
$
17,500
$
8,750
$
4,375
Book
Value
$
5,000
$
1,667
$
1,000

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