Question: Comprehensive problem on amortization of long lived assets
On 1st January 2006, Maple Leaf Corporation reported the following property, plant, equipments and other intangible assets.
|
Assets
|
Cost
|
Estimated life
|
Salvage value
|
Accumulated amortization
|
|
Land
|
4500000
|
N.A.
|
Nil
|
|
|
Building
|
6000000
|
40 years
|
Nil
|
3300000
|
|
Equipment
|
2000000
|
10 years
|
Nil
|
1250000
|
|
Goodwill
|
370000
|
N.A.
|
Nil
|
|
During 2006 following transactions occurred.
|
Date
|
Transactions
|
Amount
|
|
April 1
|
Sold equipment that cost $500,000 when purchased on Jan 1 1998
|
160000
|
|
May 1
|
Purchased land for 2460,000 and legal charges for registration of title deeds paid $40000
|
2500000
|
|
Aug 1
|
Sold land for 1400,000, Received $540,000 cash and a five year 6% Note payable for the balance. The land cost $600000
|
1400000
|
|
July 1
|
Purchased equipment for cash
|
1500000
|
|
Dec 31
|
Retired equipment that cost $400000 when purchased
|
Instructions:
1 Calculate amount of amortization expense for 2006 in respect of each asset given above and impairment loss in respect of Goodwill.
2 Record journal entries for the above transactions
3 Record adjusting entries at Dec 31 2006.
4 Prepare Property, plant and equipment section of the partial Balance sheet at December 31 2006..