# Accounting Chapter 7 Homework Longterm Assets Exercise 717 Requirement The

Page Count
14 pages
Word Count
2315 words
Book Title
Financial Accounting Connect Access Code 4th Edition
Authors
David Spiceland, Don Herrmann, Wayne Thomas
Chapter 7
Long-Term Assets
EXERCISES
Exercise 7-1
Purchase price of land (and building to be removed)
\$400,000
Title insurance
3,000
Back property taxes
4,000
Exercise 7-2
Purchase price
\$45,000
Sales tax
3,000
Debit
Equipment
49,700
Exercise 7-3
Estimated
Fair Value
Allocation
Percentage
Amount of
Recorded
Amount
Land
\$ 150,000
\$150,000/\$1,000,000 = 15%
X \$900,000
\$135,000
Exercise 7-4 (LO 7-1, 7-4)
1. Land is not depreciated. However, depreciation on the building is tax-
2. If the true allocation should have been 40% to land and 60% to building, then
the allocation of 20% to land and 80% to building, for the express purpose of
Exercise 7-5
Debit
Credit
Legal Fees Expense
7,000
Exercise 7-6
(amounts in millions)
Purchase price
\$30
Exercise 7-7
1. Patent costs capitalized
Legal fees for patent application
\$ 50,000
2. Expense items on income statement
Basic research to develop the technology
\$2,000,000
Exercise 7-8
List A
List B
____f___ 1. Intangible assets
a. Oil and gas deposits, timber
tracts, and mineral deposits.
____e___ 2. Amortization
b. Purchase price less fair market
value of net identifiable assets.
Exercise 7-9
1.
Equipment
\$40,000
Chapter 07 - Long-Term Assets
Exercise 7-10
1. Straight-line
2. Double-declining-balance
3. Activity-based
Exercise 7-11
Requirement 1
Straight-line
Requirement 2
Double-declining Balance
Calculation
End of Year Amounts
Year
Beginning
Book Value
X
Depreciation
Rate*
=
Depreciation
Expense
Accumulated
Depreciation
Book
Value**
1
40,000
0.40
16,000
16,000
24,000
Requirement 3
Activity Based
Calculation
End of Year Amounts
Year
Miles
Used
X
Depreciation
Rate*
=
Depreciation
Expense
Accumulated
Depreciation
Book
Value**
1
23,000
\$0.30
6,900
6,900
33,100
Exercise 7-12
Year
2018
(\$12,000 \$2,000)
=
\$2,500 x 3/12
=
Exercise 7-13
Year
2018
(\$22,000 \$2,000)
=
\$4,000 x 4/12
=
\$1,333
5 years
Exercise 7-14
Cost of the equipment
\$20,000
Less: Accumulated Depreciation (Years 1 and 2)
(8,000)*
Book value, end of year 2
12,000
Exercise 7-15
(\$22,000 \$2,000)
=
.20/mile
100,000
Exercise 7-16
Requirement 1
January 1, 2018
Debit
Credit
Patents
180,000
Cash
180,000
December 31, 2018
Amortization Expense
45,000
Requirement 2
Balance in patent account
Patents
180,000
45,000
Exercise 7-17
Requirement 1
The entry to record the sale is as follows:
Debit
Credit
Cash
15,000
Accumulated Depreciation
15,000*
Requirement 2
The entry to record the sale is as follows:
Debit
Credit
Cash
11,000
Exercise 7-18
Requirement 1
Find the fair value of the new land
Fair value of the old land
\$100,000
Requirement 2
Journal entry to record exchange
Debit
Credit
Land, new
115,000
Exercise 7-19
Net
Income
÷
Average
Total Assets
=
Return
on Assets
\$68,477
÷
(\$545,588 + \$675,378)/2
=
11.2%
Exercise 7-20
Requirement 1
Step 1: Test for Impairment
The long-term asset is impaired since future cash flows (\$3.0 million) are less than
book value (\$3.5 million).
Requirement 2
Step 1: Test for Impairment
The long-term asset is not impaired since future cash flows (\$4.0 million) exceed book
Chapter 8
Current Liabilities
EXERCISES
Exercise 8-1
Reporting Method
C. Current liability
Item
__C__ 1. Accounts payable.
Exercise 8-2
1. December 1, 2018
Debit
Credit
Cash
60,000
2. December 31, 2018
Interest Expense (\$60,000 x 10% x 1/12)
500
3. February 28, 2019
Notes Payable
60,000
Interest Expense (\$60,000 x 10% x 2/12)
1,000
Exercise 8-3
1. September 1, 2018
Debit
Credit
2. December 31, 2018
3. February 28, 2019
Notes Payable
10,000,000
Exercise 8-4
1. September 1, 2018
Debit
Credit
2. December 31, 2018
3. February 28, 2019
Cash
10,300,000
Exercise 8-5
Exercise 8-6
January 13
No Journal Entry
February 1
Cash
2,000,000
Exercise 8-7
Requirement 1
Total Salary Expense
(10 x 40 hours x \$20)
\$8,000
Less: Withholdings
Requirement 2
FICA Taxes
(8,000 x .0765)
\$612
Requirement 3
The company does not make an accounting entry to record the free skiing given to
Exercise 8-8
Requirement 1
January 31
Salaries Expense
1,000,000
Income Tax Payable
210,000
FICA Tax Payable
76,500
Requirement 2
January 31
Salaries Expense (fringe benefits)
30,000
Requirement 3
January 31
Payroll Tax Expense (total)
138,500
Exercise 8-9
January 31
Salaries Expense
250,000
January 31
Payroll Tax Expense (total)
34,625

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