Chapter 8 Reporting and Interpreting Property Plant and Equipment Intangibles 1 Shahia Company bought a building for 82 000 cash and the land on which it was located for 107 000 cash The company paid transfer costs of 9 000 3 000 for the building and 6 000 for the land Renovation costs on the building were 21 000 Prepare the journal entry to record the purchase of the property including all expenditures Assume that all transactions were for cash and that all purchases occurred at the start of the year Description Debit Credit Compute straight line depreciation at the end of one year assuming an estimated 10 year useful life and a 15 000 estimated residual value What would be the net book value of the property land and building at the end of year 2 Net book value 2 Purity Ice Cream Company bought a new ice cream maker at the beginning of the year at a cost of 9 000 The estimated useful life was four years and the residual value was 1 000 Assume that the estimated productive life of the machine was 16 000 hours Actual annual usage was 5 500 hours in year 1 3 800 hours in year 2 3 200 hours in year 3 and 3 500 hours in year 4 Complete a separate depreciation schedule for each of the alternative methods a Straight line Depreciation Expense Accumulated Depreciation Net Book Value Year At acquisition 1 2 3 4 b Units of production use four decimal places for the per unit output factor c Double declining balance 1 Depreciation Expense Accumulated Depreciation Net Book Value Depreciation Expense Accumulated Depreciation Net Book Value Description Debit Credit Year At acquisition 1 2 3 4 Year At acquisition 1 Transaction 2 3 4 International is a worldwide operator and franchisor of hotels and related lodging facilities totaling over 1 1 billion in property and equipment It also develops operates and markets time share properties totaling nearly 2 billion Assume that Marriott replaced furniture that had been used in the business for five years The records of the company reflected the following regarding the sale of the existing furniture Prepare the journal entry for the disposal of the furniture assuming that it was sold for a 300 000 cash b 900 000 cash c 100 000 cash 3 Marriott 4 Springer Company had three intangible assets at the end of 2014 end of the accounting year a A copyright purchased on January 1 2014 for a cash cost of 14 500 The copyright is expected to have a 10 year useful life to Springer b Goodwill of 65 000 from the purchase of the Hartford Company on July 1 2013 c A patent purchased on January 1 2013 for 48 000 The inventor had registered the patent with the U S Patent Office on January 1 2009 2 Compute the acquisition cost of each intangible asset Acquisition Cost Copyright Goodwill Patent Description Land Building Cash of each intangible at December 31 2014 The company does not use contra accounts Assume the company uses straight line method 113 000 106 000 219 000 Credit Debit Compute the amortization Amortization Copyright Goodwill Patent Show how these assets and any related expenses should be reported on the balance sheet and income statement for 2014 Assume there has been no impairment of goodwill Partial Balance Sheet for 2014 Partial Income Statement for 2014 Chapter 8 Reporting and Interpreting Property Plant and Equipment Intangibles 1 Shahia Company bought a building for 82 000 cash and the land on which it was located for 107 000 cash The company paid transfer costs of 9 000 3 000 for the building and 6 000 for the land Renovation costs on the building were 21 000 Prepare the journal entry to record the purchase of the property including all expenditures Assume that all transactions were for cash and that all purchases occurred at the start of the year 3 Compute straight line depreciation at the end of one year assuming an estimated 10 year useful life and a 15 000 estimated residual value 106 000 cost 15 000 residual value 1 10 9 100 depreciation expense per year Note Land is not depreciated What would be the net book value of the property land and building at the end of year 2 2 Purity Ice Cream Company bought a new ice cream maker at the beginning of the year at a cost of 9 000 The estimated useful life was four years and the residual value was 1 000 Assume that the estimated productive life of the machine was 16 000 hours Actual annual usage was 5 500 hours in year 1 3 800 hours in year 2 3 200 hours in year 3 and 3 500 hours in year 4 Complete a separate depreciation schedule for each of the alternative methods a Straight line Building Year Depreciation Less Accumulated depreciation Expense Land At acquisition Net book value 2 000 2 000 2 000 2 000 Accumulated Depreciation 2 000 4 000 6 000 8 000 106 000 Net Book Value 18 200 113 000 208 000 9 000 7 000 5 000 3 000 1 000 b Units of production use four decimal places for the per unit output factor Year At acquisition Depreciation Expense Accumulated Depreciation Net Book Value 2 750 1 900 1 600 1 750 2 750 4 650 6 250 8 000 c Double declining balance Year At acquisition Depreciation Expense Accumulated Depreciation Net Book Value 4 500 2 250 4 500 6 750 9 000 6 250 4 350 2 750 1 000 9 000 4 500 2 250 1 2 3 4 1 2 3 4 1 2 4 3 4 1 125 125 7 875 8 000 1 125 1 000 Transaction a Description Cash Accumulated depreciation Furniture b c Cash Accumulated depreciation Gain on sale of long lived asset Furniture Cash Accumulated depreciation Loss on sale of long lived asset Furniture Debit Credit 3 Marriott 300 000 7 700 000 900 000 7 700 000 100 000 7 700 000 200 000 8 000 000 600 000 8 000 000 8 000 000 International is a worldwide operator and franchisor of hotels and related lodging facilities totaling over 1 1 billion in property and equipment It also develops operates and markets time share properties totaling nearly 2 billion Assume that Marriott replaced furniture that had been used in the business for five years The records of the company reflected the following regarding the sale of the existing furniture Prepare the journal entry for the disposal of the furniture assuming that it was sold for a 300 000 cash b 900 000 cash c 100 000 cash 4 Springer Company had three intangible assets at the end of 2014 end of the accounting year a A copyright purchased on January 1 2014 for a cash cost of 14 500 The copyright is expected to have a 10 year useful life to Springer b Goodwill of 65 000 from the purchase of the Hartford Company on July 1 2013 c A patent purchased on January 1 2013 …
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