a. Explanation Goodwill : The value of an intangible asset is determined by the factors like quality, management, capacity to generate income and reputation with the general public and other competitive firms is known as the goodwill for the firm Amortization: When the costs of intangibles are allocated over a certain period in a systematic manner it is known as amortization of intangible assets. Research and Development Expenditure: Expenditures incurred for the purpose of research or generation of new technology, products or service is known as research and development expenditure Journalizing: Journalizing is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. 1. Journal entry to acquire the land. Date Account title and explanation Post. Ref. Debit ($) Credit ($) Land 5,000,000 Legal fee, closing cost, property taxes 35,000 Cash 5,035,000 (being acquisition of land and additional fees is recorded) Table (1) Land is the assets for the company. Since, land has been acquired due to which asset of the company will increase. Hence, land account is debited. Legal fee, closing cost is the expense account. Since, these increase the expense of the company and reduce the profit of the company. Hence, legal fee, closing cost account is debited. Cash is the asset account. Since, cash has been paid due to which equity of the reduced. Hence, cash account is credited. 2. Journal entry to the payment of property taxes. Date Account title and explanation Post. Ref. Debit ($) Credit ($) Property taxes 23,000 Cash 23,000 (to record the payment of the property taxes) Table (2) Property taxes are the expense for the company. Since, it reduces the profit of the company. Hence, property taxes account is debited. Cash is the asset account. Since, cash has been paid due to which equity of the reduced. Hence, cash account is credited. 3. Journal entry to record the removed structured on land. Date Account title and explanation Post. Ref. Debit Credit Land 62,200 Cash 62,200 (to record the removed structured on land ) Table (3) Land is the assets for the company. Since, land has been acquired due to which asset of the increase. Hence, land account is debited. Cash is the asset account. Since, cash has been paid due to which equity of the reduced. Hence, cash account is credited. 4. Journal entry to record the payment of fencing and lighting. Date Account title and explanation Post. Ref. Debit ($) Credit ($) landscaping, lighting, fencing and driveways 320,000 Cash 320,000 (to record the payment of the landscaping and lighting) Table (4) Landscaping, lighting, fencing and driveways are the expense for the company. Since, it reduces the profit of the company. Hence, landscaping, lighting, fencing and driveways account is debited. Cash is the asset account. Since, cash has been paid due to which equity of the reduced. Hence, cash account is credited. 5. Journal entry to record the cost of construction. Date Account title and explanation Post. Ref. Debit ($) Credit ($) Building 35,000,000 Cash 35,000,000 (to record the cost of the construction of building) Table (5) Building is the asset for the company. Since, the building is getting constructed due to which assets of the company will increase. Hence, building account is debited. Cash is the asset account. Since, cash has been paid due to which equity of the reduced. Hence, cash account is credited. 6. Journal entry to record the charges payment. Date Account title and explanation Post. Ref. Debit ($) Credit ($) Factory equipment 985,000 delivery and installation 35,000 Electricity 55,000 Cash 1,075,000 (to record the charges incurred) Table (6) Factory equipment is the asset for the company. Hence, factory equipment has been acquired due to which asset of the company will increase. Hence, factory equipment account is debited. Delivery and installation is the expense account. It reduces the profit of the company. Hence, delivery and installation account is debited. Electricity cost is the expense for the company. Since, it reduces the profit of the company... b. To determine The effect of the journal entry on the current year income statement, balance sheet, and cash flow statement under both the direct and indirect method.

1st Edition

ISBN: 9780132162302

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 11, Problem 11.3P

To determine

To prepare: The required journal entry.

To determine

The effect of the journal entry on the current year income statement, balance sheet, and cash flow statement under both the direct and indirect method.

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Chapter 11, Problem 11.2P

Chapter 11, Problem 11.4P

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Chapter 11 Solutions

Intermediate Accounting

Ch. 11 - Stephen J. Cosgrove is the Former Vice President....Ch. 11 - Prob. 11.2Q Ch. 11 - Prob. 11.3Q Ch. 11 - Prob. 11.4Q Ch. 11 - Will the expense/capitalization choice impact...Ch. 11 - Prob. 11.6Q Ch. 11 - Prob. 11.7Q Ch. 11 - For a long-lived operating asset acquired by...Ch. 11 - Prob. 11.9Q Ch. 11 - Prob. 11.10Q

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The required journal entry .

Solution Summary: The author describes journalizing as the process of recording the transactions of an organization in a chronological order.

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To prepare: The required journal entry.

The effect of the journal entry on the current year income statement, balance sheet, and cash flow statement under both the direct and indirect method.

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Chapter 11 Solutions