The following are selected 2011 transactions of Franco Corporation

E9-12 The following are selected 2011 transactions of Franco Corporation.

Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.
May 1 Purchased for $90,000 a patent with an estimated useful life of 5 years and a legal life
of 20 years.
Instructions
Prepare necessary adjusting entries at December 31 to record amortization required by the
events above.

TUTORIAL PREVIEW

Adjusting entries would look like this:

Related to Jan. 1 transaction

You would do nothing with goodwill 

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Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011

E9-7 Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011.The truck
has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years.Actual miles driven were 15,000 in 2011 and 12,000 in 2012.

Instructions:
(a) Compute depreciation expense for 2011 and 2012 using (1) the straight-line method, (2) the
units-of-activity method, and (3) the double-declining balance method.
(b) Assume that Brainiac uses the straight-line method.
(1) Prepare the journal entry to record 2011 depreciation.
(2) Show how the truck would be reported in the December 31, 2011, balance sheet.

TUTORIAL PREVIEW

(a) (1) Straight-line method:

2011: ($30,000 – $2,000)/8 = $3,500

2012: ($30,000 – $2,000)/8 = $3,500

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The following expenditures relating to plant assets were made by Spaulding Company during

The following expenditures relating to plant assets were made by Spaulding Company during 

E9-1 The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2011.
1. Paid $5,000 of accrued taxes at time plant site was acquired.
2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery
was in transit.
3. Paid $850 sales taxes on new delivery truck.
4. Paid $17,500 for parking lots and driveways on new plant site.
5. Paid $250 to have company name and advertising slogan painted on new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for one-year accident insurance policy on new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.
Instructions
(a) Explain the application of the cost principle in determining the acquisition cost of
plant assets.
(b) List the numbers of the foregoing transactions, and opposite each indicate the account title
to which each expenditure should be debited.

TUTORIAL PREVIEW

(a)

Under the cost principle, the acquisition cost for a plant asset includes all expenditures necessary to acquire the asset and make it ready 

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