The following expenditures were incurred by Obermeyer Company in purchasing land: cash price

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ACC291 WEEK 2

 

Determine the cost of land:

 BE9-1 The following expenditures were incurred by Obermeyer Company in purchasing land: cash price $70,000, accrued taxes $3,000, attorneys’ fees $2,500, real estate broker’s commission $2,000, and clearing and grading $3,500. What is the cost of the land?

 

Compute revised depreciation.

BE9-7 On January 1, 2011, the Ramirez Company ledger shows Equipment $29,000 and Accumulated Depreciation $9,000. The depreciation resulted from using the straight-line method with a useful life of 10 years and salvage value of $2,000. On this date, the company concludes that the equipment has a remaining useful life of only 4 years with the same salvage value. Compute the revised annual depreciation.

 

Prepare adjusting entries for amortization

E9 -12 The following are selected 2011 transactions of Franco Corporation. Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite. May 1 Purchased for $90,000 a patent with an estimated useful life of 5 years and a legal life of 20 years.

 

Prepare entries to record transactions related to acquisition and amortization of intangibles; prepare the intangible assets section

P9-7A The intangible assets section of Redeker Company at December 31, 2011, is presented

below.

Problems: Set A 435

(b) Depreciation Expense—

building $570,000;

equipment $4,772,000

(c) Total plant assets

$61,270,000

Patent ($70,000 cost less $7,000 amortization) $63,000

Franchise ($48,000 cost less $19,200 amortization) 28,800

Total $91,800

The patent was acquired in January 2011 and has a useful life of 10 years. The franchise was acquired

in January 2008 and also has a useful life of 10 years. The following cash transactions may

have affected intangible assets during 2012.

Jan. 2 Paid $45,000 legal costs to successfully defend the patent against infringement by

another company.

Jan.–June Developed a new product, incurring $140,000 in research and development costs.A

patent was granted for the product on July 1. Its useful life is equal to its legal life.

Sept. 1 Paid $50,000 to an extremely large defensive lineman to appear in commercials

advertising the company’s products. The commercials will air in September and

October.

Oct. 1 Acquired a franchise for $100,000. The franchise has a useful life of 50 years.

Instructions

(a) Prepare journal entries to record the transactions above.

(b) Prepare journal entries to record the 2012 amortization expense.

 

(c) Prepare the intangible assets section of the balance sheet at December 31, 2012.

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