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Determine the cost of plant acquisitions

(a) Explain the application of the cost principle in determining the acquisition of plant assets

(b) List the numbers of the foregoing transactions, and opposite each indicate the account title to which each expenditure should be debited

1. Paid $5000 of accrued taxes at time plant site was acquired

2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit

3. Paid $850 sales taxes on new delivery truck

4. Paid $17500 for parking lots and driveways on new plant site

5. Paid $250 to have company name and advertising slogan painted on new delivery truck

6. Paid $8000 for installation of new factory machinery

7. Paid $900 for one-year accident insurance policy on new delivery truck

8. Paid $75 motor vehicle license fee on new truck

 

Compute depreciation using different methods

Brainiac Company purchased a delivery truck for $30,000 on January 1, 2011. The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8years. Actual miles driven were 15,000 in 2011 and 12,000 in 2012.

(a) Compute depreciation expense for 2011 and 2012 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining balance method.

(b) Assume that Brainiac uses the straight-line method.

     (1)Prepare the journal entry to record 2011 depreciation.

     (2)Show how the truck would be reported in the December 31, 2011, balance sheet.

 

Prepare adjusting entries for amortization

The following are selected 2011 transactions of Franco Corporation

Jan. 1 Purchased a small company and recorded goodwill of $150,000.Its useful life is indefinite.

May 1 Purchased for $90,000 a patent with an estimated useful life of 5 years and a legal life of 20 years

Prepare necessary adjusting entries at December 31 to record amortization required by the events above.

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