WEEK 3 EXERCISES ASSIGNMENT
Exercise 11-6
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 .
Exercise 11-9
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.
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.
Exercise 11-21
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
Exercise 12-1
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.
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.
Exercise 12-6
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.
Make the
entries as of December 31, 2014, recording any necessary amortization.
Reflect
all balances accurately as of December 31, 2014. (Use straight-line
amortization.)
Exercise 12-8
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.
TUTORIAL 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
|
