Buch Corporation purchased Machine Z at the beginning

of Year #3386
Buch Corporation purchased Machine Z at the beginning of Year 1 at a cost of $100,000. The
machine is used in the production of Product X. The machine is expected to have a useful life of
10 years and no residual value. The straight-line method of depreciation is used. Adverse
economic conditions develop in Year 3 that result in a significant decline in demand for Product
X. At December 31, Year 3, the company develops the following estimates related to Machine
Z:Expected future cash flows …………………………………. $75,000Present value of expected future cas
flows ………………… 55,000Selling price …………………………………………………. 70,Costs of dispos
……………………………………………. 7,At the end of Year 5, Buch's management determines that ther
been a substantial improvement in economic conditions, resulting in a strengthening of demand
for Product Z. The following estimates related to Machine Z are developed at December 31,
Year 5:Expected future cash flows ……………………………… $70,000Present value of expected future c
flows ……………. 53,000Selling price …………………………………………….. 50,000Costs of disposal
……………………………………….. 7,000Required:Determine the carrying amounts for Machine Z to be
on the balance sheet at the end of Years 1-5, and the amounts to be reported in the income
statement related to Machine Z for Years 1-5. 27. On January 1, Year 1, Holzer Company hired
a general contractor to begin construction of a new office building. Holzer negotiated a
$900,000, five-year, 10 percent loan on January 1, Year 1, to finance construction. Payments
made to the general contractor for the building during Year 1 amount to $1,000,000. Payments
were made evenly throughout the year. Construction is completed at the end of Year 1, and
Holzer moves in and begins using the building on January 1, Year 2. The building is estimated
to have a 40-year life and no residual value. On December 31, Year 3, Holzer Company
determines that the market value for the building is $970,000.View Solution:
Buch Corporation purchased Machine Z at the beginning of Year

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