12. Archie Co. purchased a framing machine for $45,000 on January 1,2018. The ma
ID: 2595329 • Letter: 1
Question
12. Archie Co. purchased a framing machine for $45,000 on January 1,2018. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years Using the traight-line method,depreciation for 2018 and book value at December 31, 2018, would be: A) $10,000 and $30,000. 3) $11,250 and $28,750 $10,000 and $35,000 $11,250 and $33,750 13. An asset was acquired on October 1, 2018, for $78,000 with an estimated S-year life and $13,000 residual value. The company uses units-of-production depreciation and expects the asset to produce 20,000 units, Calculate the gain or loss if the asset was sold on March 31, 2021, for $58,00. Actual production was: 2018-500 units; 2019-3,000 units; 2020-3,500 units; 2021-1,000 units. A) $11,200 gain. B) $19,000 gain. C) $6,000 gain. D) $12,500 gain. 14. Kingston Corporation has $95 million of goodwill on its books from the 2016 acquisition of , management has provided the following lest (s in millions): Reliant Motors. Atthe end of its 2018 following information for its required goodwill impairment test (S in millions): S 655 Fair value of Reliant Fair value of Reliant's net assets (excluding goodwill) Book value of Reliant's net assets (including goodwill) Present value of estimated future cash flows 600 700 670 Assuming that Reliant is considered a reporting unit for U.S. GAAP, the amount of goodwill impairment loss that Kingston should recognize according to U.S. GAAP is: A) $45 million B) $55 million C) so D) $40 millionExplanation / Answer
12.
Cost - $45,000 , Residual Value - $5,000 , Life - 4 years
Depriciation = 45000 - 5000 / 4
= $10,000
Book Value = 45000 - 10000
= 35000
13.
Cost = 78000 , Residual Value = 13000
Expected Total Production = 20,000 , Actual Production = 8000 (500+3000+3500+1000)
Accumulated Depriciation = 78000-13000=65000*8000/20000
=26000
Value of Asset = 78000 - 26000
= 52000
Gain on sale of Asset = 58,000 - 52,000
= $,6000
14.
U.S. GAAP: Since the book value of Reliant exceeds fair value, there is an impairmentloss. The implied fair value of goodwill is $55 million, the difference between the fair value ofReliant of $655 million and fair value of net assets excluding goodwill of $600 million. The lossis then $40 million, the $95 million book value of goodwill less the implied fair value of $55million.
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