文本参考教程案例书long term assets rcises iii

1、Long-Term Assets Exercises IIIChristopher J. Skousen; Larry M. WaltherDownloadbooks atLarry M. Walther & Christopher J. SkousenLong-Term Assets Exercises III2eBooks at DownloadLong-Term Assets Exercises III 1st edition© 2013 Larry M. Walther & Christopher J. Skousen & All material i

2、n this publication is copyrighted, and the exclusive property ofLarry M. Walther or his licensors ( ISBN 978-87-7681-772-5).3eBooks at DownloadLong-Term Assets Exercises IIIContentsContentsProblem 1 Worksheet Solution667Problem 2 Worksheet Solution889Problem 3 Worksheet Solution101011Problem 4 Works

3、heet Solution121213Meet one of our people and theyll ask about you. Not your resume. Because its you, the, were interested in. After all, its a big, diverse world out there. Tackling global business challenges takes different viewpoints and fresh thinking. Listening.Sharing. Debating. Its all part o

4、f the job. All were missing is you. Visit Real individuality. Unreal togetherness.See More | Opportunities4eBooks at Click on the ad tomoreDownload©. 2012 Ernst & Y oung LLP .Long-Term Assets Exercises IIIContentsProblem 5 Worksheet Solution141515Problem 6 Worksheet Solution161719Problem 7

5、Worksheet Solution212223Problem 8 Worksheet Solution2425275eBooks at Click on the ad tomoreDownloadLong-Term Assets Exercises IIIProblem 1Problem 1Shaw Corporation recently requested a contractor to prepare a proposal to refurbish the exterior of its office building. Shaw wanted to give its building

6、 a “face lift.” The contractor provided the following bid document:Add extension to front porch approac$70,000Install shrubs and trees8,750Replace rotting exterior siding material26,250Replace burned out exterior light bulbs1,750Assume that Shaw Corporation agreed to the bid, and authorized the work

7、. What journal entry would be appropriate for each of the above expenditures?Worksheet6eBooks at DownloadGENERAL JOURNALDatesDebitCreditTo record addition to existing buildingTo record addition of landscaTo record replacement of siding materialTo record replacement of light bulbsLong-Term Assets Exe

8、rcises IIIProblem 1Solution7eBooks at Click on the ad tomoreDownload GENERAL JOURNALDatesDebitCreditBuilding70,000Cash70,000To record addition to existing buildingLand Improvements8,750Cash8,750To record addition of landscaAccumulated Depreciation26,250Cash26,250To record replacement of siding mater

9、ialRepair Expense1,750Cash1,750To record replacement of light bulbsLong-Term Assets Exercises IIIProblem 2Problem 2Motorway Construction Company owns a tractor that originally cost $350,000, with a 20-year life, andnoipated salvage value. Motorway uses the straight-line depreciation method. Review t

10、he followingthree independent cases, and prepare the journal entry to reflect the disposition of the tractor in each case.Case 1After 6 years of ownership, the tractor was destroyed by a flood.Case 2After 10 years of ownership, the tractor was sold for $245,000.Case 3After 17 years of ownership, the

11、 tractor was sold for $44,000.Worksheet8eBooks at DownloadGENERAL JOURNALDatesDebitCreditCase 1Case 2Case 3Long-Term Assets Exercises IIIProblem 2Solution9eBooks at DownloadGENERAL JOURNALDatesDebitCreditCase 1Accumulated Depreciation103,500Loss241,500Tractor345,000To record loss of tractor(6 years

12、X $17,250 = $103,500)Case 2Accumulated Depreciation172,500Cash245,000Gain72,500Tractor345,000To record sale of tractor(10 years X $17,250 = $172,500)Case 3Accumulated Depreciation293,250Cash44,000Loss7,750Tractor345,000To record sale of tractor(17 years X $17,250 = $293,250)Long-Term Assets Exercise

13、s IIIProblem 2Problem 3Deep Water Sport Fishing Corporation owns many sport fishing boats. The company has usually contracted with a trucking company to haul the boats to the boat dealership for repairs. With the agingof the boats, the company is incurring substal hauling costs because of the increa

14、sing frequency ofrepairs. The company is considering trading a boat for a trailer, thereby enabling it to haul boats withouthaving to hire a trucking company. This exchange trans cash flow and does have “commercial substance.on would significantly improve the companysThe trailer that will be acquire

15、d in the exchange has a fair value of $15,000. Deep Water owns two boats that are currently valued at $85,000. One of these two boats will be exchanged (and no boot will be involved). Art Fish, the owner of the Deep Water, is trying to decide which boat to give up, and isinterested in learning about

16、 the final statement impact of the exchange. Prepare alternative journalentries, assuan exchange of Boat A versus Boat B. Facts about each boat follow:Boat ACost, $105,000; accumulated depreciation $75,000Boat BCost, $60,000; accumulated depreciation $35,000Worksheet10eBooks at DownloadGENERAL JOURN

17、ALDatesDebitCreditBoat ABoat BLong-Term Assets Exercises IIIProblem 2Solution11eBooks at Click on the ad tomoreDownloadLinköUniversity innovative, highly ranked, EuropeanInterested in Strategy and Management in International Organisations? Kick-start your career with an English-taught masters d

18、egree.Click here!GENERAL JOURNALDatesDebitCreditBoat AAccumulated Depreciation75,000Trailer15,000Gain15,000Boat105,000To record gain on exchange (net book value given $20,000 ($105,000 $75,000) versus fair value, $15,000)Boat BAccumulated Depreciation35,000Trailer15,000Loss10,000Boat60,000To record

19、loss on exchange (net book value given $50,000 ($75,000 $25,000) versus fair value, $35,000)Long-Term Assets Exercises IIIProblem 4Problem 4Liquid Gold Oil acquired an existing oil well and all related equipment used in the production of oil.Liquid Gold paid $5,000,000, of which 30% was attributable

20、 to pumps, pipelines, and is expected to produce oil as follows:. The oil wellYear 1200 barrels per dayYear 2160 barrels per dayYear 3120 barrels per dayYear 4100 barrels per dayYear 550 barrels per dayAt the end of the 5th year, Liquid Goldipates selling the oil well and equipment for $2,000,000. O

21、fthis amount, $500,000 is expected to be attributable to the equipment.Assuthe above estimates serve as the basis for depletion, calculate depletion cost for the 3rd year.Prepare an approriate journal entry for depletion. In preparing the entry, assume that all oil is sold at the time of its product

22、ion (i.e., none of the oil remains in inventory).Worksheet12eBooks at DownloadGENERAL JOURNALDatesDebitCreditYear 3To record depletion of oil wellLong-Term Assets Exercises IIIProblem 4SolutionThe production rate during the 3rd year is 20% of the expected total production (based on a run rate of “12

23、0/(200 + 160 + 120 + 100 + 20)”). Therefore, depletion would be 20% of the depletable base. The depletion is calculated as follows:Total costPortion represented by natural resource Total natural resource costLess: Residual value ($2,000,000 $500,000) Depletable basePortion attributable to Year 3Year

24、 3 depletion$5,000,00070%X$3,500,0001,500,000$2,000,00020%X$400,000Note that the equipment cost would be depreciated separately.MASTER OF SCIENCE IN MANAGEMENTThe Master of Science in Management has beenvoted the Best Master 2014 in the Netherlands for the fifth time running. This could only be achi

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27、 O R L I F E13eBooks at Click on the ad tomoreDownloadGENERAL JOURNALDatesDebitCreditYear 3Depletion Expense (or COGS)400,000Oil Well400,000To record depletion of oil wellLong-Term Assets Exercises IIIProblem 5Problem 5Thral journal of Pierce Hall Industries included the following entries relating t

28、o various expendituresduring 20X8. Review this information and prepare corresponding entries to record any necessary straight- line amortization or other impairment for the year ending December 31.14eBooks at DownloadGENERAL JOURNALDatesDebitCredit01-Ftent100,000Cash100,000Acquired a patent from an

29、inventor. The patent has a 15-year remaining legal life, but it is expected that Pierce will utilize the patent for only 10 years.15-AprResearch Expense24,000Cash24,000Incurred costs in research and development activity. It is possible these costs will result in new product with a 36-month life.01-J

30、unInventory50,000Building150,000Goodwill75,000Cash275,000To record purchase of business, expected to be operated successfully for an indefinite number of future years.15-DecCopyright15,000Cash15,000Purchased copyright to aproduction, but concluded that it was worthless by year's end.Long-Term As

31、sets Exercises IIIProblem 5WorksheetSolutionResearch and development costs are expensed as incurred, and no further amortization is necessary. The goodwill is not amortized.15eBooks at DownloadGENERAL JOURNALDatesDebitCredit31-DecAmortization Expense10,000Patent10,000To record amortization of patent

32、 cost over 10-year life ($100,000/10)31-DecLoss on Impairment15,000Copyright15,000To record copyright becoworthlessGENERAL JOURNALDatesDebitCreditLong-Term Assets Exercises IIIProblem 5Problem 6Johansen Corporationsing staff was unsure of how to afor certain expenditures relatingto its property, pla

33、nt, and equipment. As a result, the company has delayed recording entries related tothe following tranions. In addition, until these items are resolved, the determination of depreciationexpense for the year has been delayed.Item AThe companys delivery truck, originally costing $65,000 and having a 5

34、-year life with nosalvage value, was substally overhauled at a cost of $15,000. This expenditure occurredat the beginning of the year, when the truck was three years old. Thison restored thetruck to “like-new” condition, and extended the useful life by an additional three years.Item BAt mid-year, th

35、e company added a new $80,000 dust handling unit to the heating andventilation system in its inventory waouse. This new feature is supposed to reduce dustfrom the air and provide for a cleaner environment in which to store inventory. The newdust unit has a 15-year physical life, but it isipated that

36、 it will be scraped 9 and one-halfyears after its installation, when the primary heating system is replaced. As of the beginning of the year, the heating and ventilation system had a cost of $350,000 and accumulated depreciation of $150,000.Item CThe company entered into a 5-year contract with Maste

37、r Maintenance Services Company. The agreement provides for Johansen to make monthly payments of $2,500 for all routine cleaning and maintenance activities on shop equipment. Two months of services had been provided and paid as of the end of the year. As of the beginning of the year, shop equipment h

38、ad a remaining net book value of $200,000, and a remaining life of four years.Item DJohansen entered into a joint agreement with several other companies to mutually acquire an easement on an adjoining tract of land. The easement was needed to provide right-of-way for a future rail transport line ext

39、ension that will benefit all of the participating companies. Johansen paid $30,000 for its share of the access easement. The easement is perpetual in nature.Prepare journal entries for each of the four described expenditures. Then, calculate depreciation, as appropriate, for the expenditure and/or r

40、elated assets. Assume straight-line depreciation in each case.16eBooks at DownloadLong-Term Assets Exercises IIIProblem 5Worksheet17eBooks at Click on the ad tomoreDownloadGENERAL JOURNALDatesDebitCreditLong-Term Assets Exercises IIIProblem 5Item AItem BItem CItem D18eBooks at DownloadLong-Term Asse

41、ts Exercises IIIProblem 5Solution19eBooks at Click on the ad tomoreDownload GET GROWING WITH LIDL US Were one of Europes largest retailers coto the U.S.Apply today at JOIN OUR PURCHASING TEAMGENERAL JOURNALDatesDebitCredit1-JanAccumulated Depreciation15,000Cash15,000To record significant overhaul of

42、 existing truck1-JulVentilation Equipment80,000Cash80,000To record addition of dust handling unitNov/DecMaintenance Expense2,500Cash2,500To record routine maintenance costs20XXLand Easement30,000Cash30,000To record acquisition of land easementLong-Term Assets Exercises IIIProblem 5Item AOriginal cos

43、t (annual depreciation $13,000 per year) Accumulated depreciation at beginning of year (2 years) Beginning net book valueExpenditure to reduce accumulated depreciation Revised net book valueRevised remaining life (5 years 3 years + 3 years)Depreciation expense$65,000(26,000)$39,00015,000$54,000÷

44、; 5 years$10,800Item BOriginal costAccumulated depreciation at beginning of year Beginning of year net book valueRemaining life (9.5 years + first half of year)Depreciation expense on original heating system$350,000(150,000)$200,000÷ 10 years20,000$Cost of dust handler Life (6.5 years)Annual de

45、preciation expense on dust handler Portion of year in useDepreciation expense on dust handler$95,000÷ 9.5 years10,000x 1/2 year5,000$Total depreciation expense on heating/dust handler ($20,000 + $5,000)$25,000Item CBeginning net book value Remaining life (3 years)Depreciation expense$200,000

46、47; 4 years$50,000The maintenance expense does not impact the book value or depreciation.Item DThe land easement cost is not depreciated, given its perpetual existence.20eBooks at DownloadLong-Term Assets Exercises IIIProblem 7Problem 7Brosnan Corporation recently hired aager for its struggling cons

47、truction division. The managerwas given responsibility for streamlining operations and restoring profitability. Selling selected assets is one option under consideration.Begin by reviewing the following asset listing, and prepaypothetical entries “as if ” each asset weresold for cash at its estimate

48、d fair value. Then, determine which asset should be sold if the objectivebecomes to (a) have the largest immediateing gain, (b) have the largest immediateingloss, (c) result in the highest avoidance of future depreciation expense in periods subsequent to the period of asset sale, (d) produce the mos

49、t immediate cash inflow, (e) have the largest total asset position, or (f) have no change in total assets.Accumulated DepreciationCostFair ValueAsset C Asset A Asset DAsset B$20,700,00011,250,00014,625,0003,600,000$2,250,0004,500,0005,625,000450,000$18,000,00013,500,0005,625,0003,150,00021eBooks at Click on the ad tomoreDownloadLong-Term Assets Exercises IIIProblem 7Worksheeta) Largest gainb) Largest lossc) Highest depreciation to avoidd) Largest immediate cash