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WEEK3 Exercises - E11-6 E11-9 E11-21 E12-1 E12-6 E12-8
E11-6 Muggsy Bogues Company purchased equipment for $212,000 on October
1, 2014. It is estimated that the equipment will have a useful life
of 8 years and a salvage value of $12,000. Estimated production
is 40,000 units and estimated working hours are 20,000. During
2014, Bogues uses the equipment for 525 hours and the equipment
produces 1,000 units.
Compute
depreciation expense under each of the following methods. Bogues is on a
calendar-year basis ending December 31.
(a) Straight-line
method for 2014
(b) Activity
method (units of output) for 2014
(c) Activity
method (working hours) for 2014
(d) Sum-of-the-years'-digits
method for 2016
(e)Double-declining-balance
method for 2015
E11-9 Presented below is information related to LeBron James Manufacturing
Corporation.
Asset Cost Estimated
Salvage Estimated Life (in years)
A $
40,500 $ 5,500 10
B 33,600 4,800 9
C 36,000 3,600 9
D 19,000 1,500 7
E 23,500 2,500 6
Compute the
rate of depreciation per year to be applied to the plant assets under the
composite method.
Composite
rate %
Prepare the
adjusting entry necessary at the end of the year to record depreciation for the
year
|
Account Titles and Explanation
|
Debit
|
Credit
|
Prepare the
entry to record the sale of asset D for cash of $4,800. It was used
for 6 years, and depreciation was entered under the composite method.
|
Account Titles and Explanation
|
Debit
|
Credit
|
|
|
||
E11-21 Forda Lumber Company owns a 7,000-acre tract of timber purchased in
2007 at a cost of $1,300 per acre. At the time of purchase, the land was
estimated to have a value of $300 per acre without the timber. Forda
Lumber Company has not logged this tract since it was purchased. In 2014, Forda
had the timber cruised. The cruise (appraiser) estimated that each acre
contained 8,000 board feet of timber. In 2014, Forda
built 10 miles of roads at a cost of $7,840 per mile. After the
roads were completed, Forda logged and sold 3,500 trees
containing 850,000 board feet.
Determine the
cost of timber sold related to depletion for 2014.
Cost of timber
sold
If Forda
depreciates the logging roads on the basis of timber cut, determine the
depreciation expense for 2014.
Depreciation
expense $
If Forda plants
five seedlings at a cost of $4 per seedling for each tree cut, how should
Forda treat the reforestation?
Forda
should the cost of $ and
adjust the depletion the next time the timber is harvested.
E12-1 Presented below is a list of items that could be included in the
intangible assets section of the balance sheet.
Indicate which
items on the list below would generally be reported as intangible assets in the
balance sheet.
Reported as
1. Investment in a subsidiary company.
2. Timberland.
3. Cost of engineering activity required to advance
the design of a product to the manufacturing stage.
4. Lease prepayment (6 months’ rent paid in
advance).
5. Cost of equipment obtained.
6. Cost of searching for applications of new
research findings.
7. Costs incurred in the formation of a
corporation.
8. Operating losses incurred in the start-up of a
business.
9. Training costs incurred in start-up of new
operation.
10 Purchase cost of a franchise.
11. Goodwill generated internally.
12. Cost of testing in search for product
alternatives.
13. Goodwill acquired in the purchase of a
business.
14. Cost of developing a patent.
15. Cost of purchasing a patent from an inventor.
16. Legal costs incurred in securing a patent.
17. Unrecovered costs of a successful legal suit to
protect the patent.
18. Cost of conceptual formulation of possible
product alternatives.
19. Cost of purchasing a copyright.
20. Research and development costs.
21. Long-term receivables.
22. Cost of developing a trademark.
23. Cost of purchasing a trademark.
E12-6 Rolanda Marshall Company, organized in 2013, has set up a single account
for all intangible assets. The following summary discloses the debit entries
that have been recorded during 2014.
1/2/14 Purchased
patent (8-year life) $350,000
4/1/14 Purchase
goodwill (indefinite life) 360,000
7/1/14 Purchased
franchise with 10-year life; expiration date 7/1/24 450,000
8/1/14 Payment
of copyright (5-year life) 156,000
9/1/14 Research
and development costs 215,000
$1,531,000
Prepare the
necessary entries to clear the Intangible Assets account and to set up separate
accounts for distinct types of intangibles.
|
Account Titles and Explanation
|
Debit
|
Credit
|
Make the
entries as of December 31, 2014, recording any necessary amortization.
|
Account Titles and Explanation
|
Debit
|
Credit
|
Reflect all
balances accurately as of December 31, 2014. (Use straight-line amortization.)
E12-8 Horace Greeley Corporation was organized in 2013 and began operations at
the beginning of 2014. The company is involved in interior design consulting
services. The following costs were incurred prior to the start of operations.
Attorney’s fees in connection with organization of
the company $15,000
Purchase of drafting and design equipment 10,000
Costs of meetings of incorporators to discuss
organizational activities 7,000
State filing fees to incorporate 1,000
$33,000
Compute the
total amount of organization costs incurred by Greeley.
Total
organization costs $
Prepare the
journal entry to record organization costs for 2014.
|
Account Titles and Explanation
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Debit
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Credit
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SOLUTION PREVIEW
|
(a)
|
Asset |
Cost |
Estimated
Salvage
|
Depreciable
Cost
|
Estimated Life
|
Depreciation
per Year
|
|
|
A
|
$ 40,500
|
$ 5,500
|
$ 35,000
|
10
|
$ 3,500
|
|
|
B
|
33,600
|
4,800
|
28,800
|
9
|
3,200
|
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