The following are the transactions of Morrell Corporation.

The following are the transactions of Morrell Corporation.  

a.	Morrell Corporation disposed of two computers at the end of their useful lives. The computers had cost $3,200 and their Accumulated depreciation was $3,200. No residual value was received.
b.	Assume the same information as (a),except that Accumulated depreciation, updated to the date of disposal, was $2,500.

Required:

Prepare journal entries to record these transactions (Omit the "$" sign in your response):

 

Event	General Journal	Debit	Credit
a.	Accumulated depreciation
	Computers
b.	Accumulated depreciation
	Loss on disposal
	Computers

An equipment was purchased at a cost of $33,400 on September 1, 2010. The equipment has an estimated residual value of $2,790 and an estimated useful life of five years or 20,200 hours. Assume the equipment was used for 1,080 hours from September 1 to December 31.

An equipment was purchased at a cost of $33,400 on September 1, 2010. The equipment has an estimated residual value of $2,790 and an estimated useful life of five years or 20,200 hours. Assume the equipment was used for 1,080 hours from September 1 to December 31.

 

Required:

Calculate the amount of depreciation to report during the year ended December 31, using following methods(Round your answers to the nearest dollar amount. Omit the "$" sign in your response):

Straight-line	$
Double-declining-balance	$
Units-of-production	$

 

Explanation:

Annual straight-line depreciation	=	(Cost – Residual Value) x 1/Useful Life
	=	($33,400 – $2,790) x 1/5 years
	=	$6,122 per year

 

September 1 - December 31 = 4 months, so depreciation is $6,122 x 4/12 = $2,041.

 

Double-declining-balance	=	(Cost – Accumulated Depreciation) x 2/Useful Life
Year 1 Depreciation	=	($33,400 – $0) x 2/5
	=	$13,360 for the year

 

September 1 - December 31 = 4 months, so depreciation is $13,360 x 4/12 = $4,453.

 

Units-of-production	=	(Cost – Residual Value) x Actual /Estimated Total Production
		($33,400 – $2,790) x 1,080/20,200 = $1,637.

Because the actual production is based on four months, we do not need to scale-down the $1,637 calculated depreciation. It already represents four months of depreciation.

 

As part of a major renovation at the beginning of the year, Hauser Pharmaceuticals, Inc., sold shelving

As part of a major renovation at the beginning of the year, Hauser Pharmaceuticals, Inc., sold shelving units (store fixtures) that were 9 years old for $1,210 cash. The shelves originally cost $5,190 and had been depreciated on a straight-line basis over an estimated useful life of 9 years with an estimated residual value of $420. Assuming that depreciation has been recorded to the date of sale, show the effect of the disposal on the accounting equation.

     

Required:
(a)	Assuming that depreciation has been recorded to the date of sale, show the effect of the disposal on the accounting equation. Indicate the effects (accounts, amounts, and + , – , or "NE" for no effect) of the transaction.

  

Assets		=	Liabilities		+	Stockholders' Equity
Cash	+1,210		No effect	NE		Gain on disposal	+790
Store fixtures	-5,190
Accumulated depreciation	+4,770

   

(b)	Prepare the journal entry to record the sale of the shelving units. (Omit the "$" sign in your response.)

     

General Journal	Debit	Credit
Cash
Accumulated depreciation on store fixtures
Store fixtures
Gain on sale of store fixtures

rev: 10_14_2011

Explanation:

Store fixtures (original cost)	$	5,190
Accumulated depreciation at the end of 9 year
Depreciation expense = ($5,190 cost – $420 residual value) × 1/9 = $530
Accumulated depreciation = $530 annual depreciation expense × 9 yrs =		4,770
Book value at the end of tenth year (i.e., immediately prior to sale)	$	420

Proceeds on sale	$	1,210
Book value		(420	)
Gain on sale	$	790

The cost of the two-year-old machine is $210,000. It has an estimated residual value of $40,000, and has an estimated useful life of four years. The company uses straight-line depreciation.

The cost of the two-year-old machine is $210,000. It has an estimated residual value of $40,000, and has an estimated useful life of four years. The company uses straight-line depreciation.

Required:

Calculate the book value of the machine at the end of second year. (Omit the "$" sign in your response.)

 

Book value

$

 

Explanation:  

Machinery (original cost)	$	210,000
Accumulated depreciation at end of year 2
Depreciation expense = ($210,000 cost – $40,000 residual value) ×       1/4 years = $42,500
Accumulated depreciation = $42,500 annual depreciation expense × 2 yrs =		85,000
Book value at the end of the second year	$	125,000

Kreiser Company had three intangible assets at the end of 2010 (end of the accounting year): a. A patent purchased from J. Miller on January 1, 2010, for a cash cost of $6,100. When purchased, the patent had an estimated life of fifteen years.

Kreiser Company had three intangible assets at the end of 2010 (end of the accounting year):

a.	A patent purchased from J. Miller on January 1, 2010, for a cash cost of $6,100. When purchased, the patent had an estimated life of fifteen years.
b.	A trademark was registered with the federal government for $12,000. Management estimated that the trademark could be worth as much as $200,000 because it has an indefinite life.
c.	Computer licensing rights were purchased on January 1, 2010, for $67,000. The rights are expected to have a four-year useful life to the company.

Requirement 1:

Compute the acquisition cost of each intangible asset. (Omit the "$" sign in your response.)

	Acquisition cost
Patent	$
Trademark
Licensing rights

 

Requirement 2:

Compute the amortization of each intangible for the year ended December 31, 2010. (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

	Amortization expense
Patent	$
Trademark
Licensing rights

 

Requirement 3:

Show how these assets and any related expenses should be reported on the balance sheet and income statement for 2010. (Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

Income statement for 2010:
Amortization expense	$

 

Balance sheet at December 31, 2010:
Intangibles:
Patent, net	$
Trademark
Licensing rights, net
Total Intangibles	$

 

Explanation:

2:

Amortization for the year ended December 31, 2010 (straight-line method with no residual value):

Patent: $6,100 × 1/15 years remaining = $407 amortization expense

Trademark: The trademark is not amortized due to its indefinite life.

Licensing rights: $67,000 × 1/4 years = $16,750 amortization expense

 

3:

Amortization expense = $407 + $16,750 = $17,157

Patent, net ($6,100 – $407) = 5,693

 

On January 1, 2010, the records of Tuff Turf Corporation (TTC) showed the following regarding production equipment:

On January 1, 2010, the records of Tuff Turf Corporation (TTC) showed the following regarding production equipment:  

Equipment (estimated residual value, $2,200)	$	16,800
Accumulated depreciation (straight-line, one year)		2,920

Required:

Based on the data given, compute the estimated useful life of the equipment. (Round your answer to the nearest whole number.)

 

Estimated useful life

years

 

Explanation:

Depreciation expense per year: = $2,920

Estimated useful life:

($16,800 − $2,200) × 1/? useful life = $2,920 per year

$14,600 / $2,920 = 5 years useful life

Bridge City Consulting bought a building and the land on which it is located for $169,400 cash. The land is estimated to represent 60 percent of the purchase price. The company paid $28,000 for building renovations before it was ready for use.

Bridge City Consulting bought a building and the land on which it is located for $169,400 cash. The land is estimated to represent 60 percent of the purchase price. The company paid $28,000 for building renovations before it was ready for use.

 

Requirement 1:

The renovation costs should be capitalized.

True

 

Requirement 2:

Give the journal entry to record all expenditures. Assume that all transactions were for cash and they occurred at the start of the year. (Omit the "$" sign in your response.)

General-Journal	Debit	Credit
Land
Buildings
Cash

 

Requirement 3:

Compute straight-line depreciation on the building at the end of one year, assuming an estimated 13-year useful life and a $14,400 estimated residual value.(Round your answer to the nearest whole number. Omit the "$" sign in your response.)

 

Depreciation

$

Requirement 4:

What should be the book value of the land and building at the end of year 2? (Round your answer to the nearest whole number. Omit the "$" sign in your response.)

Book value

$

 

Explanation:

1:

The renovation costs should be capitalized because they are necessary costs of preparing the building for use.

2:

Land = $169,400 x 60% = $101,640

Building = ($169,400 x 40%) + $28,000 = $95,760

3:

The depreciation expense on the building for the first year is $6,258 based on the following calculation:

 

Cost of building:
Initial Payment	$	67,760
Renovation prior to use		28,000
Acquisition cost:	$	95,760

 

Straight-line Depreciation: ($95,760 cost - $14,400 residual value) x1/13 years = $6,258

Land is presumed to have an unlimited life, so it is not depreciated.

4:

Computation of the book value of the property at the end of year 2:

 

Building	$	95,760
Less: Accumulated depreciation ($6,258 x 2 years)		(12,516	)		$ 83,244
Land					101,640
Book Value:					$ 184,884