Name: I-10.03 Date: Section: On January 1, 20X2, The GenKota Winery purchased a new bottling system. The system has an expected life of 5 years. The system cost $325,000. Shipping, installation, and set up was an additional $35,000. At the end of the useful life, Julie Hayes, chief accountant for GenKota, expects to dispose of the bottling system for $96,000. She further anticipates total output of 660,000 bottles over the useful life. (a) Assuming use of the straight-line depreciation method, prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year. Year Annual Expense Accumulated Depreciation at End of Year Annual Expense Calculation X2 X3 X4 X5 X6 (b) Assuming use of the units-of-output depreciation method, prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year. Actual output, in bottles, was 100,000 (20X2), 130,000 (20X3), 150,000 (20X4), 160,000 (20X5), and 120,000 (20X6). Year Annual Expense Accumulated Depreciation at End of Year Annual Expense Calculation X2 X3 X4 X5 X6 c) Assuming use of the double-declining balance depreciation method, prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year. Year Annual Expense Accumulated Depreciation at End of Year Annual Expense Calculation Name: I-10.03 Date: Section: X2 X3 X4 X5 X6 (d) Assuming use of the straight-line method, prepare revised depreciation calculations if the useful life estimate was revised at the beginning of 20X4, to anticipate a remaining useful life of 4 additional years (in other words, a total life of 6 years). The revised useful life was accompanied by a change in estimated salvage value to $54,400. Year X2 X3 X4 X5 X6 X7 Annual Expense Accumulated Depreciation at End of Year Annual Expense Calculation Name: B-10.09 Date: Section: On January 1, 20X1, Floral Features purchased a delivery truck for $65,000. At the time of purchase, Floral Features anticipated that it would use the truck for 4 years, even though its physical life is 8 years. At the end of the 4-year period, Floral believes it will be able to sell the truck for $35,000. Floral Features uses the straight-line depreciation method. Gasoline prices increased significantly, and consumers began to buy more efficient vehicles. By early 20X3, it became apparent that the market for used delivery trucks like the one belonging to Floral Features was virtually nonexistent. Accordingly, Floral Features changed its plans and decided it would use the truck for its full 8-year life. At the end of the revised useful life, it is expected that the truck will be worth $2,000 for scrap value. Prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year. Year X1 X2 X3 X4 X5 X6 X7 X8 Annual Expense Accumulated Depreciation at End of Year Annual Expense Calculation I-11.02 Pierce Corporation recently hired a new manager for its struggling construction division. The manager was given responsibility for streamlining operations and restoring profitability. Selling selected assets is one option under consideration. Begin by reviewing the following asset listing, and prepare hypothetical entries "as if" each asset were sold for cash at its estimated fair value. Then, determine which asset should be sold if the objective becomes to (a) have the largest immediate accounting gain, (b) have the largest immediate accounting loss, (c) result in the highest avoidance of future depreciation expense in periods subsequent to the period of asset sale, (d) produce the most immediate cash inflow, (e) have the largest total asset position, or (f) have no change in total assets. Accumulated Depreciation Cost Asset A $ 2,500,000 $ 1,000,000 Fair Value ######### Asset B 800,000 100,000 700,000 Asset C 4,600,000 500,000 4,000,000 Asset D 3,250,000 1,250,000 1,250,000 GENERAL JOURNAL Date Accounts To record sale of Asset A To record sale of Asset B Debit Credit I-11.02 To record sale of Asset C To record sale of Asset D (a) Largest gain (b) Largest loss (c) Highest depreciation to avoid (d) Largest immediate cash flow (e) Largest addition to total assets (f) No change in assets I-11.03 Cousin's Bar-B-Q Restaurant recently remodeled its store. The remodel included obtaining all new kitchen equipment. Much of the older equipment was traded-in as partial consideration toward the purchase of the newer items. Examine each of the following exchanges, and prepare appropriate entries to reflect the trade. Each exchange was deemed to have commercial substance, except for the trade of the smoker oven. There should be one entry for each item - seven total Cost Sink $ 10,000 Accumulated Depreciation $ 6,500 Cash Given or (Received) $ - Fair Value of New Item $ 5,000 Cutting table 20,000 8,000 - 10,000 Refrigerator 12,000 10,000 15,000 20,000 Freezer 18,000 4,000 11,000 17,000 Computer 7,500 6,000 (1,000) 5,000 Fire suppressor 9,000 2,000 (2,000) 3,000 12,500 2,500 Smoker oven - 13,000 GENERAL JOURNAL Date Accounts Debit Credit I-11.03 I-11.03 Name: I-11.05 Date: Section: Tweedy Pharmaceuticals engaged in the following activities during 20X6. Review each and prepare any entry that is needed to record the item, along with adjusting entries at December 31 to record amortization or impairment (if necessary). 1-Jan Spent $80,000 in legal fees to register a patent for an internally developed concept. The patent should benefit the company for at least its full legal life, and perhaps even longer. 1-Jul Expended $125,000 to research and develop a process that is protected by confidentially agreements with employees (i.e., "trade secret") who worked on the project. 1-Oct Purchased the "MemoryMinder" brand name from a competitor for $500,000 cash. This trademarked brand name will be used indefinitely to promote a memory aiding drug. 1-Oct Expended $90,000 to purchase a copyright with a 5-year remaining life. This copyright was purchased because it competed with a Tweedy product having a 3year remaining life. 31-Dec Concluded that $1,000,0000 of goodwill from a business combination arising in 20X5 was no longer of any value to Tweedy. GENERAL JOURNAL Date Accounts Debit Credit Name: Date: I-11.05 Section:
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