ACCT 2402 Introduction to Mang..

Purity Ice Cream Company bought a new ice cream maker at the beginning of the year at a cost of $10,000. The estimated useful life was four years, and the residual value was $1,000. Assume that the estimated productive life of the machine was 9,000 hours. Actual annual usage was 3,600 hours in year 1; 2,700 hours in year 2; 1,800 hours in year 3; and 900 hours in year 4.

Required:

1.

Complete a separate depreciation schedule for each of the alternative methods. (Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

a.

Straight-line.

Year

Depreciation
Expense

Accumulated
Depreciation

Net
Book Value

At acquisition

$ [removed]   

1

$ [removed]   

$ [removed]   

[removed]   

2

[removed]   

[removed]   

[removed]   

3

[removed]   

[removed]   

[removed]   

4

[removed]   

[removed]   

[removed]   

b.

Units-of-production (use four decimal places for the per unit output factor).

Year

Depreciation
Expense

Accumulated
Depreciation

Net
Book Value

At acquisition

$ [removed]   

1

$ [removed]   

$ [removed]   

[removed]   

2

[removed]   

[removed]   

[removed]   

3

[removed]   

[removed]   

[removed]   

4

[removed]   

[removed]   

[removed]   

c.

Double-declining-balance.

Year

Depreciation
Expense

Accumulated
Depreciation

Net
Book Value

At acquisition

$ [removed]   

1

$ [removed]   

$ [removed]   

[removed]   

2

[removed]   

[removed]   

[removed]   

3

[removed]   

[removed]   

[removed]   

4

[removed]   

[removed]   

[removed]   

Trotman Company had three intangible assets at the end of 2012 (end of the accounting year):

a.

Computer software and Web development technology purchased on January 1, 2011, for $70,000. The technology is expected to have a four-year useful life to the company.

b.

A patent purchased from Ian Zimmer on January 1, 2011, for a cash cost of $6,000. Zimmer had registered the patent with the U.S. Patent Office five years ago.

c.

An internally developed trademark registered with the federal government for $13,000 on November 1, 2012. Management decided the trademark has an indefinite life.

Required:

1.

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

Acquisition cost

  Technology

$ [removed] 

  Patent

[removed] 

  Trademark

[removed] 

2.

Compute the amortization of each intangible at December 31, 2012. The company does not use contra-accounts. (Assume the company uses straight-line method.) (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Amortization

  Technology

$ [removed] 

  Patent

[removed] 

  Trademark

[removed] 

3.

Show how these assets and any related expenses should be reported on the balance sheet and income statement for 2012. (Omit the "$" sign in your response.)

  Income statement for 2012:

     Operating expenses:

$ [removed] 

  Balance sheet at December 31, 2012:

     (under noncurrent assets)

       Intangibles:

$ [removed]

[removed]

[removed]

$ [removed] 

You are a financial analyst for Ford Motor Company and have been asked to determine the impact of alternative depreciation methods. For your analysis, you have been asked to compare methods based on a machine that cost $106,000. The estimated useful life is 13 years, and the estimated residual value is $2,000. The machine has an estimated useful life in productive output of 200,000 units. Actual output was 20,000 in year 1 and 16,000 in year 2.

Required:

1.

For years 1 and 2 only, prepare separate depreciation schedules assuming:

a.

Straight-line method. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Year

Depreciation
Expense

Accumulated
Depreciation

Net
Book Value

At acquisition

$ [removed]   

1

$ [removed]   

$ [removed]   

[removed]   

2

$ [removed]   

[removed]   

[removed]   

b.

Units-of-production method. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Year

Depreciation
Expense

Accumulated
Depreciation

Net
Book Value

At acquisition

$ [removed]   

1

$ [removed]   

$ [removed]   

[removed]   

2

[removed]   

[removed]   

[removed]   

c.

Double-declining-balance method. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Year

Depreciation
Expense

Accumulated
Depreciation

Net
Book Value

At acquisition

$ [removed]   

1

$ [removed]   

$ [removed]   

[removed]   

2

[removed]   

[removed]   

[removed]   

During 2012, Jensen Company disposed of three different assets. On January 1, 2012, prior to their disposal, the accounts reflected the following:

Asset

Original
Cost

Residual
Value

Estimated
Life

Accumulated
Depreciation
(straight line)

   Machine A

$

21,000  

$

3,000   

8 years

$

13,500 (6 years)    

   Machine B

41,000  

4,000   

10 years 

29,600 (8 years)    

   Machine C

75,000  

5,000   

15 years 

56,000 (12 years)  

The machines were disposed of in the following ways:

a.

Machine A: Sold on January 1, 2012, for $7,200 cash.

b.

Machine B: Sold on December 31, 2012, for $8,500; received cash, $2,500, and a $6,000 interest bearing (12 percent) note receivable due at the end of 12 months.

c.

Machine C: On January 1, 2012, this machine suffered irreparable damage from an accident. On January 10, 2012, a salvage company removed the machine at no cost.

Required:

1.

Give all journal entries related to the disposal of each machine in 2012. (Leave no cells blank - be certain to enter "0" wherever required. In cases where no entry is required, please select the option "No journal entry required" for your answer to grade correctly. Omit the "$" sign in your response.)

Machine A

General Journal

Debit

Credit

[removed]  

[removed]   

  [removed]   

  [removed]   

[removed]  

[removed]   

Machine B

General Journal

Debit

Credit

[removed]  

[removed]   

  [removed]   

  [removed]   

[removed]  

[removed]   

[removed]   

Machine C

General Journal

Debit

Credit

[removed]  

[removed]   

  [removed]   

  [removed]   

[removed]   

2.

Explain the accounting rationale for the way that you recorded each disposal.

Machine A:  Disposal of a long-lived asset with the price below net book value results in a

Machine B:  Disposal of a long-lived asset with the price above net book value results in a

Machine C:  Disposal of a long-lived asset due to damage results in a remaining book value.