1. Acquisition cost of long-lived assets: the following items represent expenditures (or receipts) related to construction of a new home office for Lowery company.
Cost of land site, which include an old apartment building appraised at $75,000 $165,000
Legal fees, including fee for title search $2100
Payment of apartment building mortgage and related interest due at time of sale $9300
Payment for delinquent property taxes assumed by the purchaser $4000
Cost of razing the apartment building $17,000
Proceeds from sale of salvaged materials ($3800)
Grading to establish proper drainage flow on land site $1900
Architects fee on new building $300,000
Proceeds from sales of excess dirt (from basement excavation) to owner of adjoining property (that was used to fill in a low area on property) ($2000)
Payment to building contractor $5,000,000
Payment of medical bills of employee accidentally injured while inspecting building construction $1400
Special assessment for paving city sidewalks (paid to city) $18,000
Cost of paving driveway parking lot $25,000
Cost of installing lights in parking lot $9200
Premium for insurance on building during construction $7500
Cost of open house party to celebrate the opening of new building $8000
Required
From the given data, calculate the proper balances for land, building, and land improvements accounts of Lowery Company.
2. Depreciation method: on January 2, Roth Inc. purchased a laser cutting machine to be used in the fabrication of a part for one of its key products. The machine cost $80,000, and its estimated useful life was four years or 1 million cuttings, after which it could be sold for $5000.
Required
Calculate the depreciation expense for each year of the machines useful life under each of the following depreciation methods:
a. straight-line
b. double declining balance
c. Units of production. Assume annual production and cuttings of:
a. 200,000
b. 350,000
c. 260,000
d. 190,000
3. Depreciation method: on January 2, 2012, Alvarez Company purchased an electroplating machine to help manufacture a part for one of its key products. The machine cost $218,700 and was estimated to have a useful life of six years or 700,000 pleadings, after which it could be sold for $23,400.
Required
a. calculate each year's depreciation expense for the period 2012-2017 under each of the following depreciation methods:
1. straight-line
2. double declining balance
3. Units of production. (Assume annual production in pleadings of:
i. 140,000
ii. 180,000
iii. 100,000
iv. 110,000
v. 80,000
vi. 90,000
b. Assume that the machine was purchased on September 1, 2012. Calculate each year's depreciation expense for the period 2012 through 2018 under each of the following depreciation methods:
1. straight-line
2. double declining balance
4. Accounting for planting and intangible assets: selected transactions of Continental publishers Inc., for 2013 are given below:
Jan 2: paid $90,000 to purchase copyrights to a series of romantic novels. The copyrights expire in 40 years, although sales of the novels are expected to stop after 10 years.
Mar 1: discovered a satellite dish antenna has been destroyed by lightning. The losses covered by insurance and a claim is found today. The antenna cost $9180 when installed on July 1, 2012. And was being depreciated for over 12 years with the $900 salvage value. Straight-line depreciation was last recorded on December 31, 2012. Continental expects to receive an insurance settlement of $8100
Apr 1: paid $120,000 to remodel space to create an employee exercise area on the lower level in a least building. The buildings remaining useful life is 40 years; the lease on the building expires in 12 years.
Jul 1: paid $270,000 to acquire a patent on a new publishing process. The patent has a remaining legal life of 15 years. Continental estimates to new process will be utilized for six years before it becomes obsolete.
Nov 1: paid $63,000 to obtain a four-year franchise to sell a new series of computerized do-it-yourself manuals.
Required:
a. Prepare journal entries to record these transactions.
b. Prepare the December 31 journal entries to record depreciation and amortization expense for assets acquired during the year. Continental uses straight-line depreciation and amortization.
5. Contingent liabilities: determine which of the following transactions represent contingent liabilities for Kelly leasing and indicate the proper accounting treatment for the company's fiscal year-end, by placing the letter of the correct accounting treatment in the space provided
A. accrue liability and disclose in the financial statement notes
B. disclose the financial statement footnotes only
C. no disclosure
1. Kelly leasing was sued by a customer who claimed the equipment they least was not up to standards described by Koby. Kobe stands by its claims and can support all the item specifications. Koby plans to vigorously defend itself and believes the chances of losing the lawsuit a remote.
2. A government audit of Koby found that the company is in violation of several work safety regulations. Koby has been notified that it will be assessed a fine of $25,000. Koby has agreed to make the safety changes so that it will be in compliance with the regulations.
3. Koby leasing has been served a lawsuit by a customer that claims he was injured from one of the products leased from Koby. Koby plans to defend itself in court, but his lawyers believe there is a 50-50 chance that they will lose and be forced to pay $50,000.
6. Recording payroll and payroll taxes: Beamon Corporation had the following payroll for April:
Officer salaries $32,000
Sales salaries $67,000
Federal income taxes withheld $19,000
FICA taxes withheld $7500
Health insurance premiums withheld $1600
Union dues withheld $1200
Salaries (including above) subject to federal unemployment taxes $55,000
Salaries (including above) subject to state unemployment taxes $60,000
Required prepare journal entries on April 30 to record:
a. Accrual of the monthly payroll.
b. Payment of the net payroll.
c. Accrualof employer's payroll taxes. (Assume that FICA tax matches the amount withheld, if the federal unemployment tax is 0.6%, and the state unemployment tax is 5.4%.)
d. Payment of all liabilities related to this payroll. (Assume that all are settled at the same time)