Question 1

Presented below are two independent situations:
(a) Yount Company exchanged an old machine (cost $150,000 less $90,000 accumulated depreciation) plus $10,000 cash for a new machine. The old machine had a fair value of $54,000. Prepare the entry to record the exchange of assets by Yount Company.
(b) Lawson Company trades old equipment (cost $90,000 less $54,000 accumulated deprecia-tion) for new equipment. Lawson paid $36,000 cash in the trade. The old equipment that was traded had a fair value of $54,000. Prepare the entry to record the exchange of assets by Lawson Company. The transaction has commercial substance.

Accepted Answer

The answer of Presented below are two independent situations:
(a) Yount...

Question 2

During 2015 Lopez Corporation reported net sales of $3,200,000 and net income of $1,200,000. Its balance sheet reported average total assets of $1,600,000.
Instructions
Calculate the asset turnover.

Accepted Answer

The answer of During 2015 Lopez Corporation reported net sales...

Question 3

During the current year, Marin Company incurred several expenditures. Briefly explain whether the expenditures listed below should be recorded as an operating expense or as an intangible asset. If you view the expenditure as an intangible asset, indicate the number of years over which the asset should be amortized. Explain your answer.
(a) Spent $30,000 in legal costs in a patent defense suit. The patent was unsuccessfully defended.
(b) Purchased a trademark from another company. The trademark can be renewed indefinitely. Marin Company expects the trademark to contribute to revenue indefinitely.
(c) Marin Company acquires a patent for $2,000,000. The company selling the patent has spent $1,000,000 on the research and development of it. The patent has a remaining life of 15 years.
(d) Marin Company is spending considerable time and money in developing a different patent for another product. So far $3,000,000 has been spent this year on research and development. Marin Company is very confident they will obtain this patent in the next few years.

Accepted Answer

The answer of During the current year, Marin Company incurred...

Question 4

A company purchased a patent on January 1, 2018, for $2,500,000. The patent's legal life is 20 years but the company estimates that the patent's useful life will only be 5 years from the date of acquisition. On June 30, 2018, the company paid legal costs of $135,000 in successfully defending the patent in an infringement suit. Prepare the journal entry to amortize the patent at year end on December 31, 2018.
(b) Trent Company purchased a franchise from Tastee Food Company for $400,000 on January 1, 2018. The franchise is for an indefinite time period and gives Trent Company the exclusive rights to sell Tastee Wings in a particular territory. Prepare the journal entry to record the acquisition of the franchise and any necessary adjusting entry at year end on December 31, 2018.
(c) Kline Company incurred research and development costs of $500,000 in 2018 in developing a new product. Prepare the necessary journal entries during 2018 to record these events and any adjustments at year end on December 31, 2018.

Accepted Answer

The answer of A company purchased a patent on January...

Question 5

Lynn Company owns equipment that cost $120,000 when purchased on January 1, 2015. It has been depreciated using the straight-line method based on estimated salvage value of $15,000 and an estimated useful life of 5 years.
Instructions
Prepare Lynn Company's journal entries to record the sale of the equipment in these four independent situations.
(a) Sold for $58,000 on January 1, 2018.
(b) Sold for $58,000 on May 1, 2018.
(c) Sold for $32,000 on January 1, 2018.
(d) Sold for $32,000 on October 1, 2018.

Accepted Answer

The answer of Lynn Company owns equipment that cost $120,000...

Question 6

When vacant land is acquired, expenditures for clearing, draining, filling, and grading should be charged to the ______________ account.

Accepted Answer

The answer of When vacant land is acquired, expenditures for...

Question 7

Compute the asset turnover based on the following:

Accepted Answer

The answer of Compute the asset turnover based on the...

Question 8

Gorman Mining invested $960,000 in a mine estimated to have 1,200,000 tons of ore with no salvage value. During the first year, 200,000 tons of ore were mined and sold.
Instructions
Prepare the journal entry to record depletion expense.

Accepted Answer

The answer of Gorman Mining invested $960,000 in a mine...

Question 9

With the exception of land, plant assets experience a ______________ in service potential over their useful lives.

Accepted Answer

The answer of With the exception of land, plant assets...

Question 10

For each of the following unrelated transactions, (a) determine the amount of the amortization or depletion expense for the current year, and (b) present the adjusting entries required to record each expense at year end.
(1) Timber rights were purchased on a tract of land for $480,000. The timber is estimated at 1,200,000 board feet. During the current year, 75,000 board feet of timber were cut and sold.
(2) Costs of $8,000 were incurred on January 1 to obtain a patent. Shortly thereafter, $22,000 was spent in legal costs to successfully defend the patent against competitors. The patent has an estimated legal life of 12 years.

Accepted Answer

The answer of For each of the following unrelated transactions,...

Question 11

Presented below is information related to plant assets, natural resources, and intangibles at year end on December 31, 2018, for Hanley Company:  Instructions
Prepare a partial balance sheet for Hanley Company that shows how the above listed items would be presented.

Accepted Answer

The answer of Presented below is information related to plant...

Question 12

Prepare the journal entries to record the following transactions for Ogleby Company which has a calendar year end and uses the straight-line method of depreciation.
a) On September 30, 2018, the company exchanged old delivery equipment and $36,000 for new delivery equipment. The old delivery equipment was purchased on January 1, 2016, for $126,000 and was estimated to have an $18,000 salvage value at the end of its 5-year life. Depreciation on the delivery equipment has been recorded through December 31, 2017. It is estimated that the fair value of the old delivery equipment is $54,000 on September 30, 2018.
(b) On June 30, 2018, the company exchanged old office equipment and $40,000 for new office equipment. The old office equipment originally cost $80,000 and had accumulated depreciation to the date of disposal of $35,000. It is estimated that the fair value of the old office equipment on June 30 was $60,000. The transaction has commercial substance.

Accepted Answer

The answer of Prepare the journal entries to record the...

Question 13

The cost of demolishing an old building on land that has been acquired so that a new building can be constructed should be charged to the ______________ account.

Accepted Answer

The answer of The cost of demolishing an old building...

Question 14

Dolan Company exchanges equipment with Eaton Company and Pawnee Company exchanges equipment with Fiero Company. The following information pertains to the exchanges:  Instructions
Prepare the journal entries to record the exchanges on the books of Dolan Company and Pawnee Company. The transaction has commercial substance.

Accepted Answer

The answer of Dolan Company exchanges equipment with Eaton Company...

Question 15

On January 2, 2015, Olathe Company purchased a patent for $240,000. The patent has an
8-year estimated useful life and a legal life of 20 years.
Instructions
Prepare the journal entry to record patent amortization.

Accepted Answer

The answer of On January 2, 2015, Olathe Company purchased...

Question 16

Kahn Mining Company purchased a mine for $60 million which is estimated to have 250,000 tons of ore and a salvage value of $10 million.
(a) In the first year, 50,000 tons of ore are extracted and sold. Prepare the journal entry to record depletion expense for the first year.
(b) In the second year, 150,000 tons of ore are extracted but only 125,000 tons are sold. Prepare the journal entry to record depletion expense for the second year.
(c) What amount and in what account are the tons of ore not sold reported?

Accepted Answer

The answer of Kahn Mining Company purchased a mine for...

Question 17

The cost of paving, fencing, and lighting a new company parking lot is charged to a ______________ account.

Accepted Answer

The answer of The cost of paving, fencing, and lighting...

Question 18

On July 1, 2018, Melton Inc. invested $560,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2018, 100,000 tons of ore were mined and sold.
Instructions
(a) Prepare the journal entry to record depletion expense.
(b) Assume that the 100,000 tons of ore were mined, but only 85,000 units were sold. How are the costs applicable to the 15,000 unsold units reported?

Accepted Answer

The answer of On July 1, 2018, Melton Inc. invested...

Question 19

Quayle Mining Company purchased land containing an estimated 15 million tons of ore at a cost of $4,200,000. The land without the ore is estimated to be worth $600,000. The company expects to operate the mine for 12 years. Buildings costing $600,000 are erected on the site and are expected to last for 25 years. Equipment costing $300,000 with an estimated life of 15 years is installed. The buildings and the equipment possess no salvage value after the mine is closed. During the first year of operations, the mining company mined and sold 2 million tons of ore.
Instructions
(a) Compute the depletion charge per ton.
(b) Compute the depletion expense for the first year.
(c) Compute the appropriate first year's depreciation expense for the buildings.
(d) Compute the appropriate first year's depreciation expense for the equipment.
(e) Prepare journal entries to record depletion and depreciation expenses for the year.

Accepted Answer

The answer of Quayle Mining Company purchased land containing an...

Question 20

Bell Company and Kene Company exchanged trucks on January 1, 2015. Bell's truck cost $140,000, had accumulated depreciation of $115,000, and has a fair value of $15,000. Kene's truck cost $105,000, had accumulated depreciation of $90,000, and has a fair value of $15,000.
Instructions
(a) Journalize the exchange for Bell Company.
(b) Journalize the exchange for Kene Company.

Accepted Answer

The answer of Bell Company and Kene Company exchanged trucks...

Quiz 9: Plant Assets, Natural Resources, and Intangible Assets

During 2015 Lopez Corporation reported net sales of $3,200,000 and net income of $1,200,000. Its balance sheet reported average total assets of $1,600,000. Instructions Calculate the asset turnover.

When vacant land is acquired, expenditures for clearing, draining, filling, and grading should be charged to the ______________ account.

Compute the asset turnover based on the following:

Gorman Mining invested $960,000 in a mine estimated to have 1,200,000 tons of ore with no salvage value. During the first year, 200,000 tons of ore were mined and sold. Instructions Prepare the journal entry to record depletion expense.

With the exception of land, plant assets experience a ______________ in service potential over their useful lives.

Presented below is information related to plant assets, natural resources, and intangibles at year end on December 31, 2018, for Hanley Company: Instructions Prepare a partial balance sheet for Hanley Company that shows how the above listed items would be presented.

The cost of demolishing an old building on land that has been acquired so that a new building can be constructed should be charged to the ______________ account.

On January 2, 2015, Olathe Company purchased a patent for $240,000. The patent has an 8-year estimated useful life and a legal life of 20 years. Instructions Prepare the journal entry to record patent amortization.

The cost of paving, fencing, and lighting a new company parking lot is charged to a ______________ account.