Accounting Homework
E9-20
| Financial Accounting | ||||||
| E9-20 | Partial year depreciation and sale of an asset | |||||
| LO 2, 3 [10-15 minutes] | ||||||
| Students please fill-in areas that are shaded | ||||||
| Student Name | ||||||
| Course Name | ||||||
| Student ID: | ||||||
| Date: | ||||||
| On January 2, 2018, Repeat Clothing Consignments purchased showroom fixtures | ||||||
| for $11,000 cash, expecting the fixtures to remain in service for five years. Repeat | ||||||
| has depreciated the fixtures on a double-declining-balance basis, with zero residual | ||||||
| value. On October 31, 2019, Repeat sold the fixtures for $6,200 cash. | ||||||
| Requirements | ||||||
| 1. | Record both depreciation for 2019 and sale of the fixtures on October 31, 2019. | |||||
| Test Your Knowledge | ||||||
| E9-20 | ||||||
| Req. 1 | ||||||
| Journal | ||||||
| DATE | ACCOUNTS AND EXPLANATIONS | DEBIT | CREDIT | |||
| 2019 | Depreciation for 10 months: | |||||
| Oct 31 | ||||||
| Sale of fixtures: | ||||||
| Oct 31 | ||||||
| Gain on sale of fixtures | 1,800 | |||||
| Calculate 2018 depreciation: | You can also use DDB function in excel: | |||||
| DDB = | for 2018 | |||||
| DDB = | for 10 mo. 2019 | |||||
| Calculate 2019 depreciation | ||||||
| Gain is computed as follows: | ||||||
| Sale price of old fixtures | ||||||
| Book value of old fixtures: | ||||||
| Cost | ||||||
| Less: Accm depreciation | ||||||
| Gain on sale…………………………………………………. |
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E9-24
| Financial Accounting | ||||||
| E9-24 | Acquisition of patent, amortization, and change in useful life | |||||
| LO 5 [10-15 minutes] | ||||||
| Students please fill-in areas that are shaded | ||||||
| Student Name | ||||||
| Course Name | ||||||
| Student ID: | ||||||
| Date: | ||||||
| Miracle Printers (MP) manufactures printers. Assume that MP recently paid $600,000 | ||||||
| for a patent on a new laser printer. Although it gives legal protection for 20 years, the | ||||||
| patent is expected to provide a competitive advantage for only eight years. | ||||||
| Requirements | ||||||
| 1. | Assuming the straight-line method of amortization, make journal entries to | |||||
| record (a) the purchase of the patent and (b) amortization for year 1. | ||||||
| 2. | After using the patent for four years, MP learns at an industry trade show that | |||||
| another company is designing a more efficient printer. On the basis of this new | ||||||
| information, MP decides, starting with year 5, to amortize the remaining cost of | ||||||
| the patent over two remaining years, giving the patent a total useful life of six | ||||||
| years. Record amortization for year 5. | ||||||
| Test Your Knowledge | ||||||
| E9-24 | ||||||
| Req. 1 | ||||||
| Journal | ||||||
| DATE | ACCOUNTS AND EXPLANATIONS | DEBIT | CREDIT | |||
| Req. 1 | Purchase of patent | |||||
| (a) | ||||||
| (b) | Amortization for one year: | |||||
| Req. 2 | Amortization for year 5: | |||||
| Calculate book value | ||||||
| Orginal cost | $600,000 | |||||
| Accm Depreciation: | ||||||
| Year 1 | ||||||
| Year 2 | ||||||
| Year 3 | ||||||
| Year 4 | - 0 | |||||
| Book value at beg of Yr 5 | 600,000 | |||||
| New estimated useful life remaining | ||||||
| New annual amortization |
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P9-29A
| Financial Accounting | ||||||
| P9-29A | Lump sum asset purchases, partial year depreciation, and impairments | |||||
| LO 2,3 [20-25 minutes] | ||||||
| Students please fill-in areas that are shaded | ||||||
| Student Name | ||||||
| Course Name | ||||||
| Student ID: | ||||||
| Date: | ||||||
| Gretta Chung Associates surveys American eating habits. The company’s accounts | ||||||
| include Land, Buildings, Office equipment, and Communication equipment, with a | ||||||
| separate accumulated depreciation account for each asset. During 2018 and 2019, | ||||||
| Gretta Chung completed the following transactions: | ||||||
| 2018 | ||||||
| Jan 1 | Traded in old office equipment with book value of $40,000 (cost of $132,000 | |||||
| and accumulated depreciation of $92,000) for new equipment. Chung also | ||||||
| paid $80,000 in cash. Fair value of the new equipment is $119,000. | ||||||
| Apr 1 | Acquired land and communication equipment in a group purchase. Total | |||||
| cost was $270,000 paid in cash. An independent appraisal valued the land | ||||||
| at $212,625 and the communication equipment at $70,875. | ||||||
| Sep 1 | Sold a building that cost $555,000 (accumulated depreciation of $255,000 | |||||
| through December 31 of the preceding year). Chung received $370,000 | ||||||
| cash from the sale of the building. Depreciation is computed on a | ||||||
| straight-line basis. The building has a 40-year useful life and a residual | ||||||
| value of $75,000. | ||||||
| Dec 31 | Recorded depreciation as follows: | |||||
| →Communication equipment is depreciated by the straight-line method over a | ||||||
| five-year life with zero residual value. | ||||||
| →Office equipment is depreciated using the double-declining-balance method over | ||||||
| five years with $2,000 residual value. | ||||||
| 2019 | ||||||
| Jan 1 | The company identified that the communication equipment suffered significant | |||||
| decline in value. The fair value of the communication equipment was | ||||||
| determined to be $55,000. | ||||||
| Requirements | ||||||
| 1. | Record the transactions in the journal of Gretta Chung Associates. | |||||
| Test Your Knowledge | ||||||
| P9-29A | ||||||
| Req. 1 | ||||||
| Journal | ||||||
| DATE | ACCOUNTS AND EXPLANATIONS | DEBIT | CREDIT | |||
| 2018 | ||||||
| Jan. 1 | Office equipment (new) | |||||
| Apr. 1 | ||||||
| Sept. 1 | ||||||
| Sept. 1 | ||||||
| Dec. 31 | ||||||
| Dec. 31 | ||||||
| 2019 | ||||||
| Jan. 1 |
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P9-30A
| Financial Accounting | ||||||
| P9-30A | Natural resource accounting | |||||
| LO 4 [15-20 minutes] | ||||||
| Students please fill-in areas that are shaded | ||||||
| Student Name | ||||||
| Course Name | ||||||
| Student ID: | ||||||
| Date: | ||||||
| McCabe Oil Company has an account titled Oil and gas properties. McCabe paid | ||||||
| $6,200,000 for oil reserves holding an estimated 500,000 barrels of oil. Assume the | ||||||
| company paid $510,000 for additional geological tests of the property and $490,000 | ||||||
| to prepare for drilling. During the first year, McCabe removed 90,000 barrels of oil, | ||||||
| which it sold on account for $39 per barrel. Operating expenses totaled $850,000, all | ||||||
| paid in cash. | ||||||
| Requirements | ||||||
| 1. | Record all of McCabe’s transactions, including depletion for the first year. | |||||
| Test Your Knowledge | ||||||
| P9-30A | ||||||
| Req. 1 | ||||||
| Journal | ||||||
| DATE | ACCOUNTS AND EXPLANATIONS | DEBIT | CREDIT |
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