(a)
Introduction:
If a company purchases another business and the purchase consideration was paid more than acquired assets, then extra amount should be recorded as
To choose:
Prepare the entry to record this acquisition in Mudcat’s Journal.
(b)
Introduction:
These incorporate the cost of the asset, the rescue estimation of the asset, the normal existence of the asset and more. Aside from these, any type of expansion or deletion from the asset, amid a particular period, additionally influences the viable estimation of depreciation which will be charged to the
To choose:
Calculate the amount of depletion of natural gas resource.
(c)
Introduction:
A
To choose:
Prepare journal entry to record depletion for the 2,500,000 cubic feet of natural gas recovered and sold.
(d)
Introduction:
Goodwill is the reputation or name of the company. Goodwill is the built-up notoriety of a business viewed as a quantifiable resource and determined as a component of its esteem when it is sold. Goodwill is impracticable assets.
To choose:
Is goodwill amortized? Explain your reasons.
(e)
Introduction:
All assets should be capitalized separately if company acquire the assets or make expense on the assets for the purpose increase capacity then all expense should be capitalized.
To choose:
Why land is capitalized separately form the natural gas reserves?
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Cornerstones of Financial Accounting
- Comprehensive: Acquisition, Subsequent Expenditures, and Depreciation On January 2, 2019, Lapar Corporation purchased a machine for 50,000. Lapar paid shipping expenses of 500, as well as installation costs of 1,200. The company estimated that the machine would have a useful life of 10 years and a residual value of 3,000. On January 1, 2020, Lapar made additions costing 3,600 to the machine in order to comply with pollution-control ordinances. These additions neither prolonged the life of the machine nor increased the residual value. Required: 1. If Lapar records depreciation expense under the straight-line method, how much is the depreciation expense for 2020? 2. Assume Lapar determines the machine has three significant components as shown below. If Lapar uses IFRS, what is the amount of depreciation expense that would be recorded?arrow_forwardDetermining Carrying Value and Amortization of Intangible Assets Review the following information pertaining to Denzel Company. A patent was purchased on January 2, 2018, for $149,500 when the remaining legal life was 16 years. On January 2, 2020, Denzel determined that the remaining useful life of the patent was only eight years from the date of its acquisition. On January 1, 2020, Denzel Company purchased a second patent for $184,000 cash. At January 1, 2020, 6 years of the patent's legal life of 20 years had already expired. On June 30, 2020, Denzel Company paid a firm $18,400 for a new trademark. Denzel considers the life of the trademark to be indefinite. On November 1, 2020, Denzel Company acquired all noncash assets and assumed all liabilities of Lee Company at a cash purchase price of $276,000. Denzel determined that the fair value of the identfiable net assets acquired in the transaction is $269,100. Note: When answering the following questions, do not round until your…arrow_forward! Required information [The following information applies to the questions displayed below.] The following information relates to the intangible assets of Lettuce Express: a. On January 1, 2021, Lettuce Express completed the purchase of Farmers Produce, Ic., for $1,590,000 in cash. The fair value of the identifiable net assets of Farmers Produce was $1,431,000. b. Included in the assets purchased from Farmers Produce was a patent for a method of processing lettuce valued at $54,000. The original legal life of the patent was 20 years. There are still 17 years left on the patent, but Lettuce Express estimates the patent will be useful for only 10 more years. c. Lettuce Express acquired a franchise on July 1, 2021, by paying an initial franchise fee of $187,600. The contractual life of the franchise is seven years. 2. Prepare the intangible asset section of the December 31, 2021, balance sheet. LETTUCE EXPRESS Balance Sheet December 31, 2021 (Intangible Assets Section) Intangible Assets…arrow_forward
- Computing Impairment of Intangible Assets Stiller Company had the following information for its three intangible assets. 1. Patent: A patent was purchased for $180,000 on June 30, 2018. Stiller estimated the useful life of the patent to be 15 years. On December 31, 2020, the estimated future cash flows attributed to the patent were $153,000. The fair value of the patent was $135,000. 2. Trademark: A trademark was purchased for $9,000 on August 31, 2019. The trademark is considered to have an indefinite life. The fair value of the trademark on December 31, 2020, is $4,500. 3. Goodwill: Stiller recorded goodwill in January 2019, related to a purchase of another company. The carrying value of goodwill is $54,000 on December 31, 2020. On December 31, 2020, the segment for which the goodwill relates had a fair value of $1,044,000. The book value of the net assets of the segment (including goodwill) is $1,080,000. Note: Round each of your answers to the nearest whole dollar. a. Classify each…arrow_forwardAt December 31, 2019, certain accounts included in the property, plant, and equipment section of Whispering Company's balance sheet had the following balances. Land Buildings Leasehold improvements Equipment 1. During 2020, the following transactions occurred. 2. $231,100 903,300 660,700 876,000 Land site number 621 was acquired for $854,300. In addition, to acquire the land Whispering paid a $57,200 commission to a real estate agent. Costs of $40,200 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,800. Excavation fees A second tract of land (site number 622) with a building was acquired for $420,600. The closing statement indicated that the land value was $301,500 and the building value was $119,100. Shortly after acquisition, the building was demolished at a cost of $41,200. A new building was constructed for $331,100 plus the following costs. Architectural design fees Building permit fee Imputed interest on…arrow_forwardAt December 31, 2019, certain accounts included in the property, plant, and equipment section of Reagan Company’s balance sheet had the following balances. Land Buildings Leasehold improvements Equipment $230,000 890,000 660,000 875,000 During 2020, the following transactions occurred. 1. Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000. 2. A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the following costs. Excavation fees Architectural design fees Building permit fee Imputed…arrow_forward
- Required information [The following information applies to the questions displayed below.] Dain's Diamond Bit Drilling purchased the following assets this year. Asset Drill bits (5-year) Drill bits (5-year) Commercial building Purchase Date January 29 August 11 June 11 Original Basis $ 91,000 96,000 240,000 Assume its taxable income for the year was $63,000 for purposes of computing the $179 expense (assume no bonus depreciation). (Use MACRS Table 1. Table 2. Table 3. Table 4 and Table 5.) Note: Leave no answer blank. Enter zero if applicable. b. What is Dain's maximum depreciation deduction for the year (including §179 expense)? Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Depreciation Deduction (including $179 expense)arrow_forwardOn January 1, 2019, Ginger Company purchased land and a building for a total cash price of $6,900,000. Individually, the land was appraised at $2,250,000 and the building at $5,250,000. The buildings estimated useful life is 25 years and its estimated salvage value is $300,000. a. Prepare the journal entry to record the purchase of land and building on January 1, 2019. b. What is the 2019 depreciation expense on the building, assuming that double declining-balance depreciation is used?arrow_forwardOn January 1, 2019, Alberta Company purchased land and a building for $1,120,000. At the time of the purchase, it was estimated that the building had a market value of $700,000. On January 5, Alberta installed a fence around the property at a cost of $7,000. Given this information, the journal entry to record the purchase of the land and building would include a) Debit to Land for $420,000 b) Debit to Land for $413,000 c) Debit to Land for $700,000 d) Debit to Land for $427,000arrow_forward
- Required Information [The following information applies to the questions displayed below] Timberly Construction makes a lump-sum purchase of several assets on January 1 at a total cash price of $830,000. The estimated market values of the purchased assets are building, $467,500, land, $243,100; land improvements, $56,100; and four vehicles, $168,300. Required: 1-a. Allocate the lump-sum purchase price to the separate assets purchased. 1-b. Prepare the journal entry to record the purchase. 2. Compute the first-year depreciation expense on the building using the straight-line method, assuming a 15-year life and a $29,000 salvage value. 3. Compute the first-year depreciation expense on the land improvements assuming a five-year life and double-declining-balance depreciation. Complete this question by entering your answers in the tabs below. Required 3 Allocate the lump-sum purchase price to the separate assets purchased. Required 1A Required 18 Required 2 Allocation of total cost Building…arrow_forwardThe following information relates to the intangible assets of University Testing Services (UTS):a. On January 1, 2021, UTS completed the purchase of Heinrich Corporation for $3,510,000 in cash. The fair value of the net identifiable assets of Heinrich was $3,200,000.b. Included in the assets purchased from Heinrich was a patent valued at $82,250. The original legal life of the patent was 20 years; there are 12 years remaining, but UTS believes the patent will be useful for only seven more years.c. UTS acquired a franchise on July 1, 2021, by paying an initial franchise fee of $333,000. The contractual life of the franchise is 9 years.Required:1. Record amortization expense for the intangible assets at December 31, 2021.2. Prepare the intangible asset section of the December 31, 2021, balance sheet.arrow_forwardRequired information [The following information applies to the questions displayed below.] Timberly Construction makes a lump-sum purchase of several assets on January 1 at a total cash price of $810,000. The estimated market values of the purchased assets are building, $496,800; land, $248,400; land improvements, $27,600; and four vehicles, $147,200. Required: 1-a. Allocate the lump-sum purchase price to the separate assets purchased. 1-b. Prepare the journal entry to record the purchase. 2. Compute the first-yea depreciation expense on the building using the straight-line method, assuming a 15-year life and a $30,000 salvage value. 3. Compute the first-year depreciation expense on the land improvements assuming a five-year life and double-declining-balance depreciation. Complete this question by entering your answers in the tabs below. Required 1A Required 1B Allocate the lump-sum purchase price to the separate assets purchased. Allocation of total cost Building Land Required 2…arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning