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Colacci Corporation is aCalgary-based manufacturer of gym equipment. In early January 2018,the company acquired land and a building to be used as thecompany's new head office. Colacci issued a $2M, five-yearnon-interest bearing note to the seller. Payment is to be made infive equal instalments of $400,000 at the end of each year. As aresult of a depressed real estate market, the fair value of thebuilding cannot be readily determined. However, it has beenascertained that, given Colacci 's credit rating and marketconditions, an interest rate of 9% would properly reflect thesubstance and credit risk of the negotiated payment schedule.
Otherinformation:
- One third of the total value of the acquisition isattributable to the land. o The building is expected to have auseful life of 25 years.
- Throughout the year, Colacci incurred maintenance costs of$87,000 and paid them in cash.
- A parking lot was built at a cost of $100,000 cash. The workwas completed on July 1 and is expected to have a useful life of 10years.
Required
1. Prepare all journal entries thatare required to record the above events and transactions. Round allvalues to the nearest dollar.
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