Data related to the acquisition of timber rights and intangible assets during th
ID: 2487401 • Letter: D
Question
Data related to the acquisition of timber rights and intangible assets during the current year ended December 31 are as follows:
Required:
Journalize the adjusting entries required to record the amortization, depletion, or impairment for each item. Refer to the Chart of Accounts for exact wording of account titles.
1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the items in the Instructions.
2. Journalize the transactions and the adjusting entries. Refer to the Chart of Accounts for exact wording of account titles. Scroll down to access pages 2 through 3 of the journal.
A. Timber rights on a tract of land were purchased for $1,762,820 on February 22. The stand of timber is estimated at 4,639,000 board feet. During the current year, 1,068,200 board feet of timber were cut and sold.
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JOURNAL
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Adjusting Entries
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B. On December 31, the company determined that $4,015,000 of goodwill was impaired.
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JOURNAL
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Adjusting Entries
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C. Governmental and legal costs of $6,846,000 were incurred on April 3 in obtaining a patent with an estimated economic life of 10 years. Amortization is to be for three-fourths of a year.
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JOURNAL
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Adjusting Entries
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3
A. Timber rights on a tract of land were purchased for $1,762,820 on February 22. The stand of timber is estimated at 4,639,000 board feet. During the current year, 1,068,200 board feet of timber were cut and sold. B. On December 31, the company determined that $4,015,000 of goodwill was impaired. C. Governmental and legal costs of $6,846,000 were incurred on April 3 in obtaining a patent with an estimated economic life of 10 years. Amortization is to be for three-fourths of a year.Explanation / Answer
Answer 1. Depletion Expenses per Board Feet = $1,762,820 / 4,639,000 = $0.38 per Board Feet Total Depletion Expenses = $0.38 X 1,068,200 Board Feet = $405,916 Impairment of Goodwill = $4,015,000 Amortization of Patent per Annum = $6,846,000 /10 Years - $684,600 Amortization of Patent this Year = $684,600 x 3/4 = $513,450 Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. A. Depletion Exp. Dr. 405,916.00 To Accumulated Depletion 405,916.00 B Loss From Impaired Goodwill Dr. 4,015,000.00 To Goodwill 4,015,000.00 C Amortization Exp. - Patent Dr. 513,450.00 To Patent 513,450.00
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