ACCT 301 Connect Homework Chapter 11 solutions complete answers

ACCT 301 Connect Homework Chapter 11 solutions complete answers 

 

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Question 1

 

On January 1, 2021, Canseco Plumbing Fixtures purchased equipment for $54,000. Residual value at the end of an estimated four-year service life is expected to be $10,000. The company expects the equipment to operate for 20,000 hours. The equipment operated for 3,400 and 4,200 hours in 2021 and 2022, respectively.

 

a. Calculate depreciation expense for 2021 and 2022 using straight-line method.

 

b. Calculate depreciation expense for 2021 and 2022 using double-declining-balance method.

 

c. Calculate depreciation expense for 2021 and 2022 using units-of-production using hours operated.

 

Question 2

 

On July 15, 2021, Cottonwood Industries sold a patent and equipment to Roquemore Corporation for $810,000 and $355,000, respectively. On the date of the sale, the book value of the patent was $150,000, and the book value of the equipment was $436,000 (cost of $616,000 less accumulated depreciation of $180,000)

 

Prepare the journal entries to record the sales of the patent and equipment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

 

Question 3

 

At the beginning of 2019, Robotics Inc. acquired a manufacturing facility for $14.0 million. $11.0 million of the purchase price was allocated to the building. Depreciation for 2019 and 2020 was calculated using the straight-line method, a 20-year useful life, and a $3.0 million residual value. In 2021, the estimates of useful life and residual value were changed to 15 total years and $700,000, respectively.

 

What is depreciation on the building for 2021? (Round answer to the nearest whole dollar.)

 

Question 4

 

On October 1, 2021, the Allegheny Corporation purchased equipment for $257,000. The estimated service life of the equipment is 10 years and the estimated residual value is $4,000. The equipment is expected to produce 460,000 units during its life.

 

Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service.

 

Question 5

 

Howarth Manufacturing Company purchased equipment on June 30, 2017, at a cost of $100,000. The residual value of the equipment was estimated to be $10,000 at the end of a five-year life. The equipment was sold on March 31, 2021, for $24,000. Howarth uses the straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service.

 

1. Prepare the journal entry to record the sale.

 

2. Assuming that Howarth had instead used the double-declining-balance method, prepare the journal entry to record the sale.

 

Question 6

 

On April 17, 2021, the Loadstone Mining Company purchased the rights to a coal mine. The purchase price plus additional costs necessary to prepare the mine for extraction of the coal totaled $5,300,000. The company expects to extract 1,060,000 tons of coal during a four-year period. During 2021, 256,000 tons were extracted and sold immediately.

 

1. Calculate depletion for 2021.

 

2. Is depletion considered part of the product cost and included in the cost of inventory?

 

Question 7

 

At the beginning of 2021, Terra Lumber Company purchased a timber tract from Boise Cantor for $4,230,000. After the timber is cleared, the land will have a residual value of $690,000. Roads to enable logging operations were constructed and completed on March 30, 2021. The cost of the roads, which have no residual value and no alternative use after the tract is cleared, was $354,000. During 2021, Terra logged 590,000 of the estimated 5.9 million board feet of timber.

 

Calculate the 2021 depletion of the timber tract and depreciation of the logging roads assuming the units-of-production method is used for both assets. (Do not round intermediate calculations. Enter values in whole dollars.)

 

Question 8

 

Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2017, when it was acquired at a cost of $25.2 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the beginning of 2021.

 

Prepare the year-end journal entry for patent amortization in 2021. No amortization was recorded during the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5)).

 

Question 9

 

At December 31, 2020, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:

 

Depreciation methods and useful lives:

 

Buildings—150% declining balance; 25 years.

 

Equipment—Straight line; 10 years.

 

Automobiles and trucks—200% declining balance; 5 years, all acquired after 2017.

 

Leasehold improvements—Straight line.

 

Land improvements—Straight line.

 

Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2021 and other information:

 

On January 6, 2021, a plant facility consisting of land and building was acquired from King Corp. in exchange for 34,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $50 a share. Current assessed values of land and building for property tax purposes are $210,000 and $630,000, respectively.

 

On March 25, 2021, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $246,000. These expenditures had an estimated useful life of 12 years.

 

The leasehold improvements were completed on December 31, 2017, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2023, was renewable for an additional four-year term. On April 30, 2021, Cord exercised the renewal option.

 

On July 1, 2021, equipment was purchased at a total invoice cost of $334,000. Additional costs of $10,000 for delivery and $59,000 for installation were incurred.

 

On September 30, 2021, Cord purchased a new automobile for $13,400.

 

On September 30, 2021, a truck with a cost of $24,900 and a book value of $10,800 on date of sale was sold for $12,400. Depreciation for the nine months ended September 30, 2021, was $2,430.

 

On December 20, 2021, equipment with a cost of $21,500 and a book value of $3,200 at date of disposition was scrapped without cash recovery.

 

1. Prepare a schedule analyzing the changes in each of the plant asset accounts during 2021. Do not analyze changes in accumulated depreciation and amortization.

 

2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2021.

 

Question 10

 

The Thompson Corporation, a manufacturer of steel products, began operations on October 1, 2019. The accounting department of Thompson has started the fixed-asset and depreciation schedule presented below. You have been asked to assist in completing this schedule. In addition to ascertaining that the data already on the schedule are correct, you have obtained the following information from the company's records and personnel: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

 

Depreciation is computed from the first of the month of acquisition to the first of the month of disposition.

 

Land A and Building A were acquired from a predecessor corporation. Thompson paid $742,500 for the land and building together. At the time of acquisition, the land had a fair value of $99,600 and the building had a fair value of $730,400.

 

Land B was acquired on October 2, 2019, in exchange for 2,300 newly issued shares of Thompson’s common stock. At the date of acquisition, the stock had a par value of $5 per share and a fair value of $18 per share. During October 2019, Thompson paid $9,700 to demolish an existing building on this land so it could construct a new building.

 

Construction of Building B on the newly acquired land began on October 1, 2020. By September 30, 2021, Thompson had paid $140,000 of the estimated total construction costs of $230,000. Estimated completion and occupancy are July 2022.

 

Certain equipment was donated to the corporation by the city. An independent appraisal of the equipment when donated placed the fair value at $13,200 and the residual value at $1,300.

 

Equipment A’s total cost of $115,000 includes installation charges of $480 and normal repairs and maintenance of $10,300. Residual value is estimated at $5,700. Equipment A was sold on February 1, 2021.

 

On October 1, 2020, Equipment B was acquired with a down payment of $3,300 and the remaining payments to be made in 10 annual installments of $3,300 each beginning October 1, 2021. The prevailing interest rate was 7%.

 

Supply the correct amount for each answer box on the schedule. (Round your intermediate calculations and final answers to the nearest whole dollar.)

 

Question 11

 

At the beginning of 2019, Metatec Inc. acquired Ellison Technology Corporation for $510 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired:

 

The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a 5-year useful life, no residual value, and is amortized using the straight-line method.

 

At the end of 2021, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined:

 

1. Compute the book value of the plant and equipment and patent at the end of 2021.

 

4. Determine the amount of any impairment loss to be recorded, if any, for the three assets.