1. Bruegger Transportation purchased a ship on January 1, 2022, for £20,000,000. The useful life of the ship is 40 years, but it is subject to a government-mandated major overhaul every 4 years with a total projected cost over the 40 years of £4,000,000. The present value related to these payments is £3,200,000. Explain how this transaction should be accounted for at January 1, 2022, and at December 31, 2022. Prepare the journal entries to record all appropriate entries related to the ship in 2022. Bruegger uses the straight-line method of depreciation and assumes no residual value for the ship.

1. Bruegger Transportation purchased a ship on January 1, 2022, for £20,000,000. The useful life of the ship is 40 years, but it is subject to a government-mandated major overhaul every 4 years with a total projected cost over the 40 years of £4,000,000. The present value related to these payments is £3,200,000. Explain how this transaction should be accounted for at January 1, 2022, and at December 31, 2022. Prepare the journal entries to record all appropriate entries related to the ship in 2022. Bruegger uses the straight-line method of depreciation and assumes no residual value for the ship.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion

Section: Chapter Questions

Problem 29CE

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