Question 1:
In 2010, CopperCo Corporation purchased a mine for $200 million ($30 million were applicable to the land). An independent evaluation estimated the mine's reserves at 7.5 million tons. In 2010, CopperCo extracted 0.9 million tons.
Instructions: Calculate the company's depletion expense for 2010.
Question 2:
a. In 2011, McLane Company exchanged equipment for two delivery trucks. The equipment had been purchased for $110,000 ten years ago and has since been fully depreciated. While the equipment was recently appraised at $19,000, a reliable valuation for the trucks was not available. Assume the transaction has commercial substance.
Instructions: Prepare the required entr(ies) to record the exchange.
b. Beringer Co. has a computer that cost $106,000 on March 20, 2006. This old computer had an estimated life of ten years and a residual value of $6,000. On December 23, 2010, the old computer is exchanged for a similar computer with a market value of $58,000. Beringer also received $6,000 cash. Assume that the last fiscal period ended on December 31, 2009, that straight-line depreciation is used, and that the transaction does not have commercial substance.
Instructions: Prepare all entries that are necessary on December 23, 2010.
Question 3:
Brokaw Corporation's balance sheet includes the following asset:
Equipment $110,000
Less: Accumulated depreciation: (20,000)
Carrying amount $90,000
After performing its annual review for impairment, Brokaw obtains the following data:
Asset value in use: $64,000
Fair value less selling costs: $67,000
Instructions:
Assuming Brokaw uses the rational entity impairment model,
1. Calculate the recoverable amount.
2. Calculate the impairment loss.
3. Prepare the entry to record the impairment loss