Exerclse 9-11 nese·re selected 2017 tronsactions for Firt ponton: 1 Purchased a
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Exerclse 9-11 nese·re selected 2017 tronsactions for Firt ponton: 1 Purchased a copyright for $132,300. The copyrnight has a useful life of 7 years and a remaining legal life of 32 years. Mar. 1 aseda patent with an Sept.1 Purchased a small compeny and recorded goodwil of $150,950. 1ts usnful life is indelinite. estimated med ife of 4 years and a legal ife of 2S yar, fr S62.160. Prepare all adjusting entries at December 31 to record amount is entered. Do not Indent manually. no amortization required by the events. (Credit account titles are automatically indented Account Titles and Explanation Dec. 31 To recond amortiration of Copyrights) Dec. 31 To recoed amortization of Patents) Dec. 31 (To record amortization of Goodw Click if you would like to Sthow work for this question: Show Work MacBook Air Y/ 4 0Explanation / Answer
An intangible asset is an asset which does not exist in physical form. It cannot be seen, touched for feel.Examples of intangible assets are Trademark, copyrights, patents etc. The intangible assets are amortized over thier useful life only. They generally do not have any residual value therefore full amount of asset is amortized.
Note (1) Patent is purchased on March 1 for $62,160 whose useful life is 4 years. Amortization expense for patent will be calculated for 10 months (from March 1 to december 31)
Amortization expense- Patent (annually) = $15,540 ($62,160 / 4)
Amortization expense- Patent ( for 10 months) = $12,950 ($15,540*10 / 12)
(2) As per FASB statement 142, goodwill cannot be amortized. This change has taken place in year 2001.
Question 2:
(1) Machinery was purchased at cost of $62,480 on January1, 2007. Its useful life was 10 years with no scrap value. It is discarded on January 1, 2017 when the machinery has been fully utilized. Therefore, entry to close the machinery account and accumulated depreciation on machinery needs to be passed. Accumulated depreciation on machinery in 10 years will be equal to cost of machinery.
(2) Forklift was purchased at cost of $26,400 on January1, 2014. Its useful life is 5 years with no scrap value. It is sold on June 30, 2017 for $10,560. Therefore annual depreciation on forklift will be calculated as below:
Depreciation = (Cost of asset - scrap value) / useful life in years
Depreciation = ($26,400 - 0) / 5
Depreciation = $5,280
Step 1: Calculate total depreciation on forklift till June 30.
Total depreciation on date of sale of forklift = Depreciation for year 2014+ Depreciation for year 2015+ Depreciation for year 2016+ Depreciation for year 2017 ( till june 30)
Depreciation on forklift on date of sale = $5,280+ $5,280+$5,280+($5,280 / 2)
Depreciation on forklift on date of sale = $18,480
Step 2: Now calculate the net value of forklift by subtracting total depreciation from cost of asset.
Net value of forklift on June 30 =$7,920 ( $26,400 - $18,480)
Step 3: Calculate Profit or gain on sale of forklift
The forklift is sold for $10,560 on June 30 while its net value was $7,920.Therefore, there is gain on sale of forklift.
Gain on sale of forklift = $10,560 - $7,920
Gain on sale of forklift = $2,640
The journal entry to record sale of forklift will be as follows:
(3)
Truck was purchased for $29,392 on January 1, 2012. Its useful life is 8 years and has scrap value of $2,640. It was discarded on December 31.Therefore annual depreciation on truck will be calculated as below:
Depreciation = (Cost of asset - scrap value) / useful life in years
Depreciation = ($29.392 - $2,640) / 8
Depreciation = $3,344
Step1: Calculate total depreciation on truck till December 31
Total depreciation on date of sale of truck = Depreciation for 5 years (from 2012 to 2017)
Total Depreciation on truck on date of sale = $16,720 ($3,344 * 5)
Step 2: Now calculate the net value of truck by subtracting total depreciation from cost of asset.
Net value of truck on December 31 =$12,672 ( $29,392 - $16,720)
Since the truck is discarded, therefore net value of truck is the actual loss on truck.
The journal entry to record sale of truck will be as follows:
(To record discarding of truck)
Date Accounts title and explanation Debit Credit Dec 31 Amortization expense - Copyright ($132,300 / 7) $18,900 Copyright $18,900 (To record amortization of copyright) Dec 31 Amortization expense - Patent $12,950(1) Patent $12,950 (To record amortization of Patent) Dec 31 No entry(2) (To record amortization of Goodwill)Related Questions
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