Exam 9: Property, Plant and Equipment Intangibles

The purchase of real estate that includes land, building, and land improvements is called a lump-sum purchase.

Goodwill is written down to its fair value if the fair value is less than its carrying value.

Petra Co. sold the machine on July 1, 2020 for $19,000. Prepare all journal entries required by HRO in 2020 relating to the machine and its disposal.

Prepare journal entries to record the following transactions of Salem Sales Co. during the current year: Mar 1 Purchased a truck for $\$ 60,000$ with a 6 year useful life and a $\$ 10,000$ residual value. Salem also paid $7 \%$ provincial sales tax, a $\$ 500$ annual truck license, $\$ 4,000$ to paint the truck and $\$ 2,300$ for spare parts. All payments were in cash. Mar 12 Purchased a garage from a neighbouring business with a $\$ 60,000$ note payable. The seller's book value for the garage was $\$ 57,000$ and the garage was appraised at $\$ 68,000$ . The estimated useful life is 12 years. Salem also paid a $\$ 4,000$ cash for real estate commission. June 5 Paid $\$ 750$ to replace garage windows broken during a hail storm. Aug 23 Purchase used office equipment for $\$ 13,500$ plus provincial sales tax of $\$ 945$ terms $2 / 10$ , n 30 from Great West Office Supplies. As well, Salem paid freight of $\$ 300$ and reconditioning cost of $\$ 850$ on credit. Estimated useful life of 4 years and a residual value of $\$ 1,000$ . Sept 12 Paid for office equipment purchased on August 23'd. Oct 5 Purchased store equipment for $\$ 28,000$ plus $\$ 1,960$ in provincial sales tax. As well, Salem paid $\$ 1,750$ for repairs incurred from an accident during installation. $\$ 5,200$ for a special base for the equipment and $\$ 3,700$ of supplies to be used for regular preventive maintenance. Estimated useful life is 9 years and residual value is $\$ 1,300$ .

Compare the three different depreciation methods: straight-line, units of production, and double-declining balance.

Headstrom Industries (HI) exchanged a three-year-old truck for a new truck that had a list price of $50,000, which was its fair value. The old truck originally cost $65,000 and has accumulated depreciation of $25,000 to the date of exchange. In addition to the $45,000 trade-in given for the old truck, HI paid $8,000 cash to complete the deal. Record the asset exchange.

Property, plant and equipment are

SportsWorld discarded a display case it had purchased for $8,000. $7,200 in accumulated depreciation had been recorded to the date of sale. SportsWorld should recognize a gain or loss on disposal of

Explain what could cause the impairment of goodwill. How often should goodwill be tested to see if it is impaired?

Capital expenditures are also called balance sheet expenditures.

Depreciation is the process of allocating the cost of a tangible asset in a rational and systematic manner over the asset's estimated useful life.

A depreciation method that produces larger depreciation charges during the early years of an asset's life and smaller charges in the later years is

Discuss the four issues in accounting for property, plant and equipment.

Fisherman Company purchased a light truck on October 1, 20220 at a cost of $72,000. The truck is expected to last six years and have a residual value of $5,200. Fisherman Company uses the calendar year as their fiscal year, and the nearest whole month method for depreciation. (1) What is the depreciation expense for 2020, assuming the straight-line method is used? (2) What is the depreciation expense for 2021, assuming the double-declining-balance method at twice the straight-line rate is used?

SportsWorld purchased store equipment for $65,000. The equipment has an estimated residual value of $6,000, with an estimated useful life of 10 years. The annual depreciation using the straight-line method will be $3,900 per year.

Residual value is an estimate of an asset's value at the end of its useful life.

A patent is an exclusive right granted to its owner to manufacture and sell a patented machine or device, or to use a process, for a specified period of time.

Upside Down Company purchased new office equipment for $4,300, by trading in old equipment with a cost of $2,000 and accumulated depreciation to the date of trade of $1,900. Upside Down received a $50 trade-in allowance for the old equipment. This transaction has commercial substance. Prepare the journal entry to record the transaction.

Prime Co paid $200,000 to purchase a piece of land on which to build a new building. Additional costs incurred were: Real estate broker's commissions \ 10,800 Legal fees of purchasing the real estate 1,400 Landscaping expenses 6,000 Expense to demolish old house located on 1,500 land Proceeds from selling materials salvaged 900 from old house What dollar amount of the above costs should be allocated to Land and what amount should be allocated to the new Building?

On April 1, 2020, Thunderbird Co sold a piece of equipment that had cost $35,000 on January 1, 2011. The equipment had a residual value of $5,000, a useful life 10 years, and double-declining-balance depreciation at twice the straight-line rate was used. On December 31, 2019, accumulated depreciation was $20,664. The asset was sold for $14,200. Prepare the journal entry to record depreciation up to the date of disposal of the equipment, and the journal entry to record the disposal of the equipment.