LO 11.1Selected accounts from Hanna Corporation’s trial balance are as follows. Prepare the assets section of the company’s balance sheet.
LO 11.1Selected accounts from Boxwood 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 seven machines for $250,000 to improve efficiency in production of their remaining useful life of eight years
- Low-cost repairs throughout the year totaled $79,000
- Replaced a broken gear on a machine for $6,000
- What amount should be expensed during the period?
- What amount should be capitalized during the period?
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
- 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 extraordinary repairs
- Depreciation expense recorded for the year is $15,000.
If all transactions were recorded properly, what is the amount of increase to the Property, Plant, and Equipment section of Johnson’s balance sheet resulting from this year’s transactions? What amount did Johnson report on the income statement for expenses for the year?
LO 11.3Underwood’s Miners recently purchased the rights to a diamond mine. It is estimated that there are two million tons of ore within the mine. Underwood’s paid $46,000,000 for the rights and expects to harvest the ore over the next fifteen years. The following is the expected extraction for the next five years.
- Year 1: 50,000 tons
- Year 2: 900,000 tons
- Year 3: 400,000 tons
- Year 4: 210,000 tons
- Year 5: 150,000 tons
Calculate the depletion expense for the next five years and create the journal entry for year one.
LO 11.3Tree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $5,000,000 for the land. Tree Lovers will sell the lumber as it is harvested and it expects to deplete it over ten years (150 acres in year one, 300 acres in year two, 250 acres in year three, 150 acres in year four, and 100 acres in year five). Calculate the depletion expense for the next five years and create the journal entry for year one.
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 the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montello’s depreciation expense each year and what the truck’s book value will be each year after depreciation expense is recorded.
LO 13.4Prepare the assets section of the balance sheet as of December 31 for Hooper’s International using the following information:
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 seventeen-year remaining legal life was purchased for $850,000. The patent will be usable for another six years.
- A patent was acquired on a new tablet. The cost of the patent itself was only $12,000, but the market value of the patent is $150,000. The company expects to be able to use this patent for all twenty years of its life.
LO 11.4On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.
LO 11.4Farm Fresh Agriculture Company purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000.
- What is the amount of goodwill in this transaction?
- What is Farm Fresh Agriculture Company’s journal entry to record the purchase of Sunny Side Egg Distribution?
- What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?
LO 11.5Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and is expected to be driven for ten years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After five years of recording depreciation, Montezuma determines that the delivery truck will be useful for another five years (ten years in total, as originally expected) and that the salvage value will increase to $10,000. Determine the depreciation expense for the final five years of the asset’s life, and create the journal entry for years 6–10 (the entry will be the same for each of the five years).
LO 11.5Garcia Co. owns equipment that costs $150,000, with accumulated depreciation of $65,000. 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:
- $90,000 cash
- $85,000 cash
- $80,000 cash
LO 11.5Urquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the asset’s life, and create the journal entry for year eleven.