Brown Company paid cash to purchase the assets of Coffee Company on January 1, 2019. Information is as follows: Total cash paid Assets acquired: Land Building Machinery S3,500,000 se00,000 5500,000 5900,000 5500,000 Patents The building is depreciated using the double-declining balance method. Other information is: Salvage value Estimated useful life in years S50,000 The machinery is depreciated using the units-of-production method. Other information is: Salvage value, percentage of cost Estimated total production output in Actual production in units was as 2019 2020 2021 10% 200,000 40,000 60,000 20,000 The patents are amortized on a straight-line basis. They have no salvage va Estimated useful life of patents in On December 31, 2020, the value of the patents was estimated to be 30 $100,000 Where applicable, the company uses the % year rule to calculate depreciation and amortization expense in the years of acquisition and disposal. Its fiscal year-end is December 31. The machinery was traded on December 2, 2021 for new machinery. Other information is: $240,000 $288,000 $403,200 20 $8,064 Fair value of old machinery Trade-in allowance List price for new machinery Estimated useful life of new machinery in Estimated salvage value of new The new machinery is depreciated using the straight-line method and On August 14, 2023, an addition was made. This amount was material. Other relevant information is as follows: Amount of addition, paid in cash $100,000 Number of years of useful life from 2023 (original machinery and addition): Salvage value, percentage of addition 30 10% Required: Prepare journal entries to record: 1 The purchase of the assets of Coffee. 2 Depreciation and amortization expense on the purchased assets for 2019 3 The decline (if any) in value of the patents at December 31 4 The trade-in of the old machinery and purchase of the new 5 Depreciation on the new machinery for 2021. 6 Cost of the addition to the machinery on August 14, 2023. 7 Depreciation on the new machinery for 2023.
Brown Company paid cash to purchase the assets of Coffee Company on January 1, 2019. Information is as follows: Total cash paid Assets acquired: Land Building Machinery S3,500,000 se00,000 5500,000 5900,000 5500,000 Patents The building is depreciated using the double-declining balance method. Other information is: Salvage value Estimated useful life in years S50,000 The machinery is depreciated using the units-of-production method. Other information is: Salvage value, percentage of cost Estimated total production output in Actual production in units was as 2019 2020 2021 10% 200,000 40,000 60,000 20,000 The patents are amortized on a straight-line basis. They have no salvage va Estimated useful life of patents in On December 31, 2020, the value of the patents was estimated to be 30 $100,000 Where applicable, the company uses the % year rule to calculate depreciation and amortization expense in the years of acquisition and disposal. Its fiscal year-end is December 31. The machinery was traded on December 2, 2021 for new machinery. Other information is: $240,000 $288,000 $403,200 20 $8,064 Fair value of old machinery Trade-in allowance List price for new machinery Estimated useful life of new machinery in Estimated salvage value of new The new machinery is depreciated using the straight-line method and On August 14, 2023, an addition was made. This amount was material. Other relevant information is as follows: Amount of addition, paid in cash $100,000 Number of years of useful life from 2023 (original machinery and addition): Salvage value, percentage of addition 30 10% Required: Prepare journal entries to record: 1 The purchase of the assets of Coffee. 2 Depreciation and amortization expense on the purchased assets for 2019 3 The decline (if any) in value of the patents at December 31 4 The trade-in of the old machinery and purchase of the new 5 Depreciation on the new machinery for 2021. 6 Cost of the addition to the machinery on August 14, 2023. 7 Depreciation on the new machinery for 2023.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 8P: Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of...
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Transcribed Image Text:Brown Company paid cash to purchase the assets of Coffee Company
on January 1, 2019. Information is as follows:
Total cash paid
Assets acquired:
S3,500,000
se00,000
5500,000
S900,000
$500,000
Land
Building
Machinery
Patents
The building is depreciated using the double-declining balance
method. Other information is:
Salvage value
Estimated useful life in years
S50,000
40
The machinery is depreciated using the units-of-production method.
Other information is:
Salvage value, percentage of cost
Estimated total production output in
Actual production in units was as
10%
200,000
2019
2020
40,000
60,000
20,000
2021
The patents are amortized on a straight-line basis. They have no salvage value.
Estimated useful life of patents in
30
On December 31, 2020, the value of the
patents was estimated to be
$100,000
Where applicable, the company uses the % year rule to calculate
depreciation and amortization expense in the years of acquisition
and disposal. Its fiscal year-end is December 31.
The machinery was traded on December 2, 2021 for new machinery.
Other information is:
Fair value of old machinery
$240,000
$288,000
$403,200
Trade-in allowance
List price for new machinery
Estimated useful life of new machinery in
20
Estimated salvage value of new
$8,084
The new machinery is depreciated using the straight-line method and
On August 14, 2023, an addition was made. This amount was
material. Other relevant information is as follows:
Amount of addition, paid in cash
$100,000
Number of years of useful life from 2023
(original machinery and addition):
Salvage value, percentage of addition
30
10%
Required: Prepare journal entries to record:
1 The purchase of the assets of Coffee.
2 Depreciation and amortization expense on the purchased assets for 2019.
3 The dedine (if any) in value of the patents at December 31
4 The trade-in of the old machinery and purchase of the new
5 Depreciation on the new machinery for 2021.
6 Cost of the addition to the machinery on August 14, 2023.
7 Depreciation on the new machinery for 2023.
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