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Exercise 8-19 (10 minutes)
Jan. 1
Copyright ................................................................
418,000
Cash..........................................................................
418,000
To record purchase of copyright.
Dec. 31
Amortization Expense—Copyright ............................
41,800
Accumulated Amortization—Copyright ................
41,800
To record amortization of copyright
[$418,000 / 10 years].
Exercise 8-20 (10 minutes)
1. Goodwill = $2,500,000 - $1,800,000 = $700,000
Exercise 8-21 (15 minutes)
1. $7,358 million cash for property and equipment
Exercise 8-22 (15 minutes)
Total asset turnover for 2014 = = 3.36
$5,856,480
($1,800,000 + $1,686,000)/2
Exercise 8-23A (15 minutes)
1. Book value of the old tractor ($96,000 - $52,500) .......................... $ 43,500
Exercise 8-25 (20 minutes)
(Amounts for this exercise are in euros millions)
1.
Depreciation expense ....................................................
6,689
Accumulated depreciation—Property, plant
and equipment.....................................................
6,689
To record depreciation on property, plant and
equipment.
2.
Property, plant and equipment .....................................
11,061
Cash .........................................................................
11,061
To record betterments (improvements) on property,
plant and equipment.
3.
Cash ................................................................................
700
Loss on disposal of property, plant and equipment ..
500
Accumulated Depreciation—Property, plant and
equipment ....................................................................
1,162
Property, plant and equipment ..............................
2,362
To record asset disposals.
4. Volkswagen would decrease its property, plant and equipment account
by €118 at December 31, 2013, for its 2013 total impairments.
PROBLEM SET A
Problem 8-1A (50 minutes)
Part 1
Estimated
Market Value
Percent
of Total
Apportioned
Cost
Building ..........................
$508,800
53%
$477,000
Land ...............................
297,600
31
279,000
Land improvements ......
28,800
3
27,000
Vehicles .........................
124,800
13
117,000
Total ...............................
$960,000
100%
$900,000
2015
Jan. 1
Building ................................................................
477,000
Land ................................................................................
279,000
Land Improvements .......................................................
27,000
Vehicles ................................................................
117,000
Cash ................................................................
900,000
To record asset purchases.
Part 2
Year 2015 straight-line depreciation on building
Part 3
Year 2015 double-declining-balance depreciation on land improvements
Part 4
Accelerated depreciation does not lower the total amount of taxes paid over
the asset's life. Instead, it defers or postpones taxes to the later years of an
Problem 8-2A (25 minutes)
Problem 8-3A (45 minutes)
Part 1
Land
Building
2
Building
3
Land
Improve-
ments 1
Land
Improvements
2
Purchase price* ...................
$1,612,000
$598,000
$390,000
Demolition ...........................
328,400
Land grading .......................
175,400
New building........................
$2,202,000
New improvements .............
_________
_______
_________
_______
$164,000
Totals ................................
$2,115,800
$598,000
$2,202,000
$390,000
$164,000
*Allocation of purchase price
Appraised
Value
Percent
of Total
Apportioned
Cost**
Land .........................................
$1,736,000
62%
$1,612,000
Building 2 ................................
644,000
23
598,000
Land Improvements 1 .............
420,000
15
390,000
Totals .......................................
$2,800,000
100%
$2,600,000
**Multiply the percentages in column 3 by the $2,600,000 purchase price.
Part 2
2015
Jan. 1
Land ......................................................................
2,115,800
Building 2 .............................................................
598,000
Building 3 .............................................................
2,202,000
Land Improvements 1 .........................................
390,000
Land Improvements 2 .........................................
164,000
Cash ................................................................
5,469,800
To record costs of plant assets.
Part 3
2015
Dec. 31
Depreciation Expense—Building 2 ..............................
26,900
Accumulated Depreciation—Building 2 ................
26,900
To record depreciation [($598,000 - $60,000)/20].
Problem 8-4A (50 minutes)
2014
Jan. 1
Equipment ................................................................
300,600
Cash .....................................................................
300,600
To record loader costs ($287,600 +$11,500 +$1,500).
Jan. 3
Equipment ................................................................
4,800
Cash ........................................................................
4,800
To record betterment of loader.
Problem 8-5A (40 minutes)
2014
Jan. 1
Trucks ...........................................................................
22,000
Cash ........................................................................
22,000
To record cost of truck ($20,515 + $1,485).
Problem 8-6A (20 minutes)
1.
Jan. 2
Machinery ................................................................
178,000
Cash ....................................................................
178,000
To record machinery purchase.
Jan. 3
Machinery ................................................................
2,840
Cash ....................................................................
2,840
To record machinery costs.
Jan. 3
Machinery ................................................................
1,160
Cash ....................................................................
1,160
To record machinery costs.
2. a. First year
Dec. 31
Depreciation Expense—Machinery ............................
28,000
Accumulated Depreciation—Machinery ..............
28,000
To record depreciation [($182,000 - $14,000)/6].
b. Fifth year
Dec. 31
Depreciation Expense—Machinery ............................
28,000
Accumulated Depreciation—Machinery ..............
28,000
To record year’s depreciation.
3. Accumulated depreciation at the date of disposal
Five years' depreciation (5 x $28,000) .........................
$140,000
Book value at the date of disposal
Original total cost .........................................................
$182,000
Accumulated depreciation ...........................................
(140,000)
Book value ....................................................................
$ 42,000
a. Sold for $15,000 cash
Dec. 31
Cash ..............................................................................
15,000
Loss on Sale of Machinery .........................................
27,000
Accumulated Depreciation—Machinery ....................
140,000
Machinery ................................................................
182,000
Problem 8-7A (20 minutes)
a.
July 23
Mineral Deposit ............................................................
4,715,000
Cash ................................................................
4,715,000
To record purchase of mineral deposit.
b.
July 25
Machinery ................................................................
410,000
Cash ................................................................
410,000
To record costs of machinery.
c.
Dec. 31
Depletion Expense—Mineral Deposit ........................
441,600
Accum. Depletion—Mineral Deposit ....................
441,600
To record depletion [$4,715,000/
5,125,000 tons = $0.92 per ton.
480,000 tons x $0.92 = $441,600].
d.
Dec. 31
Depreciation Expense—Machinery ............................
38,400
Accum. Depreciation—Machinery .......................
38,400
To record depreciation [$410,000/
5,125,000 tons = $0.08 per ton.
480,000 tons x $0.08 = $38,400].
Analysis Component
Similarities—Amortization, depletion, and depreciation are similar in that
Problem 8-8A (20 minutes)
1.
2015
(a)
June 25
Leasehold ................................................................
200,000
Cash ........................................................................
200,000
To record payment for sublease.
(b)
July 1
Prepaid Rent................................................................
80,000
Cash ........................................................................
80,000
To record prepaid annual lease rental.
(c)
July 5
Leasehold Improvements ...........................................
130,000
Cash ........................................................................
130,000
To record costs of leasehold improvements.
2.
2015
(a)
Dec. 31
Rent Expense ...............................................................
10,000
Accumulated Amortization—Leasehold ..............
10,000
To record leasehold amortization ($200,000/10 x 6/12).
(b)
Dec. 31
Amortization Expense—Leasehold Improvements ...........
6,500
Accumulated Amortization—Leasehold
Improvements ............................................................
6,500
To record leasehold improvement amortization
($130,000/10 years remaining on lease x 6/12).
(c)
Dec. 31
Rent Expense ...............................................................
40,000
Prepaid Rent ..........................................................
40,000
To record one-half year lease rental ($80,000 x 6/12).
PROBLEM SET B
Problem 8-1B (50 minutes)
Part 1
Estimated
Market Value
Percent
of Total
Apportioned
Cost
Building ..........................
$ 890,000
50%
$ 900,000
Land ................................
427,200
24
432,000
Land improvements ......
249,200
14
252,000
Trucks .............................
213,600
12
216,000
Total ................................
$1,780,000
100%
$1,800,000
2015
Jan. 1
Buildings ................................................................
900,000
Land ................................................................
432,000
Land Improvements ......................................................
252,000
Trucks ................................................................
216,000
Cash ................................................................
1,800,000
To record asset purchases.
Part 2
Year 2015 straight-line depreciation on building
Part 3
Year 2015 double-declining-balance depreciation on land improvements
Part 4
Accelerated depreciation does not increase the total amount of taxes paid
over the asset’s life. Instead, it defers or postpones taxes to the later years of
Problem 8-2B (25 minutes)
Problem 8-3B (45 minutes)
Part 1
Land
Building
B
Building
C
Land
Improve-
ments B
Land
Improve-
ments C
Purchase price* ..........
$ 868,000
$527,000
$155,000
Demolition ..................
122,000
Land grading ..............
174,500
New building...............
$1,458,000
New improvements ....
_________
_______
_________
_______
$103,500
Totals ..........................
$1,164,500
$527,000
$1,458,000
$155,000
$103,500
Allocation of
purchase price
Appraised
Value
Percent
of Total
Apportioned
Cost
Land .........................................
$ 795,200
56%
$ 868,000
Building B ................................
482,800
34
527,000
Land Improvements B .............
142,000
10
155,000
Totals .......................................
$1,420,000
100%
$1,550,000
Part 2
2015
Jan. 1
Land .........................................................................
1,164,500
Building B................................................................
527,000
Building C................................................................
1,458,000
Land Improvements B ............................................
155,000
Land Improvements C ............................................
103,500
Cash ...................................................................
3,408,000
To record cost of plant assets.
Part 3
2015
Dec. 31
Depreciation Expense—Building B ................................
28,500
Accumulated Depreciation—Building B ..........................
28,500
To record depreciation [($527,000 - $99,500)/15].
