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Brown Company Accounting Study Notes

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Brown Company paid cash to purchase the assets of Coffee Company on January 1, 2019. Information is as follows: $4,500,000 Total cash paid Assets acquired: $800,000 Land $700,000 Building $800,000 Machinery $700,000 Patents The building is depreciated using the double-declining balance method. Other information is: $70,000 Salvage value 20 Estimated useful life in years The machinery is depreciated using the units-of-production method. Other information is: 10% Salvage value, percentage of cost 100,000 Estimated total production output in units Actual production in units was as follows: 20,000 2019 20,000 2020 30,000 2021 The patents are amortized on a straight-line basis. They have no salvage value. 40 Estimated useful life of patents in years On December 31, 2020, the value of the patents was estimated to be $100,000 Where applicable, 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. The machinery was traded on December 2, 2021 for new machinery. Other information is: $400,000 Fair value of old machinery $600,000 Trade-in allowance $840,000 List price for new machinery 10 Estimated useful life of new machinery in years $8,400 Estimated salvage value of new machinery The new machinery if depreciated using the stright-line method and ½ year rule. On August 14, 2023, an addition was made. This amount was material. Other relevant information is as follows: $400,00 ...
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