Calculate depreciation and amortization expense

Response to the following problem:

Brown Company paid $900,000 cash to purchase the following tangible and intangible assets of Coffee Company on January 1, 2016:

Land                     $300,000

Building                   200,000

Patents                   100,000

Machinery               250,000

The building is depreciated using the double-declining balance method, has an estimated useful life of ten years, and a residual value of $10,000. The machinery has an estimated useful life of five years and a residual value of 10% of cost. Depreciation expense is calculated on the basis of productive output. The machinery's productive output was estimated to be 60,000 units. Actual production was as follows:







The patents have an estimated useful life of twenty years and are amortized on a straight-line basis. They have no residual value. On December 31, 2017, the value of the patents was estimated to be $80,000. The machinery was sold on December 2, 2018 for $100,000. The company uses the ½ year rule to calculate depreciation and amortization expense in the years of acquisition and disposal. Its fiscal year-end is December 31.


Prepare journal entries to record in the records of Brown:

1. The $900,000 purchase

2. Depreciation and amortization expense for 2016

3. The decline in value of the patents at December 31, 2017

4. The sale of the machinery.

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Cost Accounting: Calculate depreciation and amortization expense
Reference No:- TGS02089927

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