LO 11.1New Carlisle, Incorporated, has the following assets in its trial balance:
What is New Carlisle’s total amount of intangible assets?
LO 11.2Johnson, Incorporated had the following transactions during the year:
- Purchased a building for $5,000,000 using a mortgage for financing
- Paid $2,000 for ordinary repair on a piece of equipment
- Sold product on account to customers for $1,500,600
- Purchased a copyright for $5,000 cash
- Paid $20,000 cash to add a storage shed in the corner of an existing building
- Paid $360,000 in monthly salaries
- Paid $25,000 for routine maintenance on equipment
- Paid $110,000 for major repairs
If all transactions were recorded properly, what amount did Johnson capitalize for the year, and what amount did Johnson expense for the year?
LO 11.3Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for ten years. Montello uses the straight-line depreciation method. Calculate the annual depreciation expense.
LO 11.3Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.
LO 11.3Steele Corp. purchases equipment for $30,000. Regarding the purchase, Steele
- paid shipping of $1,200,
- paid installation fees of $2,750,
- pays annual maintenance cost of $250, and
- received a 10% discount on sales price.
Determine the acquisition cost of the equipment.
LO 11.3Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a life of twenty years, but Calico expects to be able to sell the drug for fifty years. Calculate the amortization expense and record the journal for the first year’s expense.
LO 11.3Kenzie purchased a new 3-D printer for $450,000. Although this printer is expected to last for ten years, Kenzie knows the technology will become old quickly and so she plans to replace this printer in three years. At that point, Kenzie believes she will be able to sell the printer for $30,000. Calculate yearly depreciation using the double-declining-balance method.
LO 11.3Using the information from Exercise 11.7, calculate depreciation using the straight-line method.
LO 11.3Ronson recently purchased a new boat to help ship product overseas. The following information is related to that purchase:
- purchase price $4,500,000
- cost to bring boat to production facility $15,000
- yearly insurance cost $12,000
- pays annual maintenance cost of $22,000
- received a 10% discount on sales price
Determine the acquisition cost of the boat and record the journal entry needed.
LO 11.3Warriors Production recently purchased a copyright on its new film. Although the copyright is expected to last a minimum of twenty-five years, the chief executive officer of the company believes this B-list movie will only be useful for the next five years. Calculate the amortization expense and record the journal for the first-year expense. The total cost of the copyright was $23,500.
LO 11.4The following intangible assets were purchased by Hanna Unlimited:
- A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000.
- A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000.
Determine the annual amortization amount for each intangible asset.
LO 11.5Baglia’s Wholesale Trinkets has a 3-D printer used in operations. The original useful life was estimated to be six years. However, after two years of use, the printer was overhauled, and its total useful life was extended to eight years. How many years of depreciation remain after the overhaul in year 2?