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].
Depreciation Expense—Building 3 …………………….…..
72,400
Accumulated Depreciation—Building 3 ………..…..
72,400
To record depreciation [($2,202,000 – $392,000)/25].
Depreciation Expense—Land Improv. 1 ……………..…..
32,500
Accum. Depreciation—Land Improv. 1 ………….…..
32,500
To record depreciation [$390,000/12].
Depreciation Expense—Land Improv. 2 ……………..…..
Accum. Depreciation—Land Improv. 2 ………….…..
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.
To record depreciation.
Jan. 1
Equipment ……………………………………………………….
5,400
Cash ………………………………………………………….…..
5,400
To record extraordinary repair on loader.
Cash ………………………………………………………….…..
To record ordinary repair on loader.
Problem 8-5A (40 minutes)
2014
Jan. 1
Trucks ………………………………………………………………...
22,000
Cash ……………………………………………………………...
22,000
To record cost of truck ($20,515 + $1,485).
To record depreciation [($22,000 – $2,000)/5].
To record depreciation.
To record sale of truck.
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
Dec. 31
Cash ……………………………………………………………..…….
50,000
Accumulated Depreciation—Machinery ………….…….
140,000
Machinery ……………………………………………………….
182,000
Gain on Sale of Machinery …………………………..
8,000
Dec. 31
Cash ……………………………………………………………..…….
30,000
Accumulated Depreciation—Machinery ………….…….
140,000
Loss from Fire ……………………………………………….…….
12,000
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].
Depreciation Expense—Building C ……………………...
60,000
Accumulated Depreciation—Building C …………..
60,000
To record depreciation [($1,458,000 – $258,000)/20].
31,000
31,000
10,350
10,350