ACC108 week 1 assignment

Assets and Depreciation Worksheet

Part 1. Acquisition Cost

On August 21, Oldham Industries bought 100 acres of land in order to expand its operations. The purchase price was $375,000. In addition, Oldham paid $30,000 in taxes and fees, $27,000 to remove two existing buildings, and $50,000 to grade and fill the land before it could be used. Oldham sold materials salvaged from the two buildings for $25,000.

Calculate the amount that Oldham would record as the cost of the land and prepare the journal entry to record the purchase. Enter your answers in the shaded boxes.

General Journal
Date	Account Names	Debit	Credit
Aug 21
	To record purchase of land.

Part 2. Depreciation Methods

Hickman Labs purchases equipment for its plant on January 1 for $80,000. The equipment has an estimated useful life of 8 years and an estimated salvage value of $20,000. It is expected to produce 100,000 units during its useful life. The equipment produces 18,000 and 21,000 units in its first and second years or operation.

Complete the following items. Enter your answers in the shaded boxes.

a. What is the depreciation expense for the first two years using the straight-line method?

Year 1
Year 2

b. What is the depreciation expense for the first two years using the double-declining-balance method? Hint: Depreciation Expense = (Straight-Line Rate of Depreciation x 2) x Net Book Value

Year 1
Year 2

c. What is the per unit depreciation expense using the units-of-activity method? Hint: The Depreciation Expense per Unit = (Cost – Salvage Value) / Useful Life in Units

d. What is the depreciation expense for the first two years using the units-of-activity method? Hint: Depreciation Expense = Depreciation Expense per Unit x Actual Units of Activity

Year 1
Year 2

Part 3. Depreciation Expense

On January 1, Merida Company pays $125,000 to purchase machinery that will be used in its production facility. The company believes the equipment will have a useful life of 4 years and estimates the equipment’s salvage value to be $25,000.

Complete the following problems related to this purchase. Enter your answers in the shaded boxes.

a. What is the annual depreciation expense using the straight-line method?

b. Prepare a depreciation schedule showing the depreciation expense and net book value for the four years using the straight-line depreciation method.

Year	Depreciation Expense	Accumulated Depreciation	Net Book Value
		$0	$125,000
2013
2014
2015
2016

c. What is the rate of depreciation using the double-declining-balance method?

d. Prepare a depreciation schedule showing the depreciation expense and net book value for the four years using the double-declining-balance depreciation method.

Year	Depreciation Expense	Accumulated Depreciation	Net Book Value
		$0	$125,000
2013
2014
2015
2016

Part 4. Asset Disposal

Mojave Enterprises owns machinery that it purchased for $145,000, with accumulated depreciation of $80,000. It sells the machinery to Beck Industries on April 23.

a. Calculate the gain or loss on the sale of the machinery if it sells it for $59,000 or $68,000 in cash.

Sale Amount	Gain or Loss?	Gain or Loss Amount
$59,000
$68,000

b. Prepare the journal entries for each scenario

1. $59,000 sale journal entry:

General Journal
Date	Account Names	Debit	Credit
Apr 23

2. $68,000 sale journal entry

General Journal
Date	Account Names	Debit	Credit
Apr 23

Part 5. Intangible Assets

Bonobo Sounds has purchased the copyright to a song for $175,000 on January 1, 2013. The copyright owner is legally protected for 5 years. Bonobo plans to use the song to market its services for 7 years.

Prepare the journal entries to record the purchase of the copyright on January 1, 2013, and its annual amortization expense on December 31, 2013. Hint: Amortization expense is based on the shorter of the legal life or the useful life.

General Journal
Date	Account Names	Debit	Credit
Jan. 1
	To record purchase of copyright.

General Journal
Date	Account Names	Debit	Credit
Dec. 31
	To record amortization of copyright.