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Kerry Limited (Kerry) is incorporated in Singapore and has a financial year end of 30 September. In October and
Kerry Limited (Kerry) is incorporated in Singapore and has a financial year end of 30 September. In October and
November 20x6, Kerry removed unwanted structures on a piece of previously purchased freehold land that was intended for construction of a factory building for use in its business. The freehold land was purchased for $300,000 in May 20x6. The cost of removal and cleaning was $50,000 and this was paid in cash on 30 November 20x6.
On 1 December 20x6, Kerry started the construction of a factory building on that freehold land. On 1 August 20x7, the construction was completed, and the building became ready for service. Total cost related to the construction was $880,000 and was fully paid for in cash on 1 August 20x7. Kerry estimates the building to have an economic life of 70 years and a useful life of 40 years with a residual value of $400,000. Kerry uses the straightline depreciation method.
On 1 October 20x7, Kerry had $300,000 in cash.
On 13 April 20x8, Kerry hired technicians to inspect, maintain, and repair the lights in the building. Total cost related to this inspection was $3,500 by cash on the same day. In September 20x8, Kerry built an extension to the building. The extension increased the floor area of the factory. The extension was completed on 30 September 20x8. Total cost related to this extension was $65,000 and was paid for in cash on the same date.
Required
(i) Prepare the journal entry for the removal and cleaning on 30 November 20x6.
(ii) Prepare the journal entry for the recognition of the factory building on 1 August 20x7.
(iii) Using the information provided, help prepare Kerry's adjusted trial balance (partial) on 30 September 20x8 for the relevant accounts.
