Chapter 9: Q18RQ (page 526)
What is goodwill? Is goodwill amortized? What happens if the value of goodwill has decreased at the end of the year?
The excess amount is paid over the fair market value of the net assets in the acquisition process. A company reporting under GAAP cannot amortize the goodwill.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Alpha Communication purchased equipment on January 1, 2018, for \(27,500. Suppose Alpha Communication sold the equipment for \)20,000 on December 31, 2020. Accumulated Depreciation as of December 31, 2020, was $10,000. Journalize the sale of the equipment, assuming straight-line depreciation was used.
Question: P9-36B Determining asset cost and recording partial-year depreciation
Safe Parking, near an airport, incurred the following costs to acquire land, make land improvements, and construct and furnish a small building:
a | Purchase price of three acres of land | $86,000 |
b | Delinquent real estate taxes on the land to be paid by safe parking | 6,300 |
c | Additional dirt and earth removing | 8,400 |
d | Title insurance and the land acquisition | 3,400 |
e | Fence around the boundary of the property | 9,600 |
f | Building permit for building | 900 |
g | Architect’s fee for design of building | 20,100 |
h | Signs near the front of property | 9,000 |
i | Material used to construct the building | 217,000 |
J | Labor to construct the building | 172,000 |
k | Interest cost on construction loan for the building | 9,500 |
l | Parking lots on the property | 29,400 |
m | Lights for parking lots | 11,600 |
n | Salary of construction supervisor(80% to building; 20% to parking lot and concrete walks) | 80,000 |
o | Furniture | 11,700 |
p | Transportation of furniture from seller to the building | 1,900 |
q | Additional fencing | 6,900 |
Safe Parking depreciates land improvements over 15 years, buildings over 40 years, and furniture over 10 years, all on a straight-line basis with zero residual value.
Requirements
1. Set up columns for Land, Land Improvements, Building, and Furniture. Show how to account for each cost by listing the cost under the correct account. Determine the total cost of each asset.
2. All construction was complete and the assets were placed in service on September 1. Record partial-year depreciation expense for the year ended December 31. Round to the nearest dollar.
Plant assets are recorded at historical cost. What does the historical cost of a plant asset include?
Computing first-year depreciation and book value
On January 1, 2018, Air Canadians purchased a used airplane for \(37,000,000. Air Canadians expects the plane to remain useful for five years (4,000,000 miles) and to have a residual value of \)5,000,000. The company expects the plane to be flown 1,400,000 miles during the first year.
Requirements
1. Compute Air Canadians’s first-year depreciation expense on the plane using the following methods:
a. Straight-line
b. Units-of-production
c. Double-declining-balance
2. Show the airplane’s book value at the end of the first year for all three methods.
Making a lump-sum purchase of assets Maplewood Properties bought three lots in a subdivision for a lump-sum price. An independent appraiser valued the lots as follows:
Lot | Appraised Value |
1 | \(144,000 |
2 | 96,000 |
3 | 240,000 |
Maplewood paid \)355,000 in cash. Record the purchase in the journal, identifying each lot’s cost in a separate Land account. Round decimals to two places, and use the computed percentages throughout.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
