LO 11.1Selected accounts from Phipps Corporation’s trial balance are as follows. Prepare the assets section of the company’s balance sheet.
LO 11.1Selected accounts from Han Corporation’s trial balance are as follows. Prepare the detailed schedule showing the Property, Plant, and Equipment.
LO 11.2During the current year, Alanna Co. had the following transactions pertaining to its new office building.
- What should Alanna Co. record on its books for the land? The total cost of land includes all costs of preparing the land for use. The demolition cost of the old building is added to the land costs, and the sale of the old building scrap is subtracted from the land cost.
- What should Alanna Co. record on its books for the building?
LO 11.2During the current year, Arkells Inc. made the following expenditures relating to plant machinery.
- Renovated five machines for $100,000 to improve efficiency in production of their remaining useful life of five years
- Low-cost repairs throughout the year totaled $70,000
- Replaced a broken gear on a machine for $10,000
- What amount should be expensed during the period?
- What amount should be capitalized during the period?
LO 11.2Jada Company had the following transactions during the year:
- Purchased a machine for $500,000 using a long-term note to finance it
- Paid $500 for ordinary repair
- Purchased a patent for $45,000 cash
- Paid $200,000 cash for addition to an existing building
- Paid $60,000 for monthly salaries
- Paid $250 for routine maintenance on equipment
- Paid $10,000 for major repairs
- Depreciation expense recorded for the year is $25,000
If all transactions were recorded properly, what is the amount of increase to the Property, Plant, and Equipment section of Jada’s balance sheet resulting from this year’s transactions? What amount did Jada report on the income statement for expenses for the year?
LO 11.3Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years.
- Year 1: 50,000 tons
- Year 2: 90,000 tons
- Year 3: 100,000 tons
- Year 4: 110,000 tons
- Year 5: 130,000 tons
Calculate the depletion expense for the next five years, and create the journal entry for year one.
LO 11.3Tree Lovers Inc. purchased 100 acres of woodland in which the company intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $2,100,000 for the land. Tree Lovers will sell the lumber as it is harvested and expects to deplete it over five years (twenty acres in year one, thirty acres in year two, twenty-five acres in year three, fifteen acres in year four, and ten acres in year five). Calculate the depletion expense for the next five years and create the journal entry for year one.
LO 11.3Referring to Exercise 11.7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the purchase of the printer impacts not only depreciation expense each year but also the asset’s book value. What amount will be recorded as depreciation expense each year, and what will the book value be at the end of each year after depreciation is recorded?
LO 11.4For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense:
- A patent with a ten-year remaining legal life was purchased for $300,000. The patent will be usable for another eight years.
- A patent was acquired on a new smartphone. The cost of the patent itself was only $24,000, but the market value of the patent is $600,000. The company expects to be able to use this patent for all twenty years of its life.
LO 11.4Buchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth $4,500,000.
- What is the amount of goodwill in this transaction?
- What is Buchanan’s journal entry to record the purchase of McLaren?
- What journal entry should Buchanan write when the company internally generates additional goodwill in the year following the purchase of McLaren?
LO 11.5Montezuma Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for eight years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After three years of recording depreciation, Montezuma determines that the delivery truck will only be useful for another three years and that the salvage value will increase to $4,000. Determine the depreciation expense for the final three years of the asset’s life, and create the journal entry for year four.
LO 11.5Garcia Co. owns equipment that costs $76,800, with accumulated depreciation of $40,800. Garcia sells the equipment for cash. Record the journal entry for the sale of the equipment if Garcia were to sell the equipment for the following amounts:
- $47,000 cash
- $36,000 cash
- $31,000 cash
LO 11.5Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the asset’s life, and create the journal entry for year five.