ACC 557 Homework 3 Chapters 9 and 10
Due Week 6 and worth 70 points
Directions: Answer the following questions on a separate Microsoft Word or Excel document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in Blackboard.
E9-9. Presented below are selected transactions at Ridge Company for 2015.
Jan. 1 Retired a piece of machinery that was purchased on January 1, 2005. The machine cost $62,000 on that date. It had a useful life of 10 years with no salvage value.
June 30 Sold a computer that was purchased on January 1, 2012. The computer cost $45,000. It had a useful life of 5 years with no salvage value. The computer was sold for $14,000.
Dec. 31 Discarded a delivery truck that was purchased on January 1, 2011. The truck cost $33,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.
Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Ridge Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2014.)
E9-11. On July 1, 2015, Friedman Inc. invested $720,000 in a mine estimated to have 900,000 tons of ore of uniform grade. During the last 6 months of 2015, 100,000 tons of ore were mined and sold.
- Prepare the journal entry to record depletion expense.
- Assume that the 100,000 tons of ore were mined, but only 80,000 units were sold. How are the costs applicable to the 20,000 unsold units reported?
E10-12. Whitmore Company issued $500,000 of 5-year, 8% bonds at 97 on January 1, 2015. The bonds pay interest twice a year.
- (1) Prepare the journal entry to record the issuance of the bonds.
(2) Compute the total cost of borrowing for these bonds.
- Repeat the requirements from part (a), assuming the bonds were issued at 105.
E10-15.Jernigan Co. receives $300,000 when it issues a $300,000, 10%, mortgage note payable to ﬁnance the construction of a building at December 31, 2015. The terms provide for semiannual installment payments of $25,000 on June 30 and December 31.
Prepare the journal entries to record the mortgage loan and the ﬁrst two installment payments.
P9-7A.The intangible assets section of Sappelt Company at December 31, 2015, is presented below.
The patent was acquired in January 2015 and has a useful life of 10 years. The franchise was acquired in January 2012 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2016.
Jan. 2 Paid $27,000 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 $140,000. The franchise has a useful life of 50 years.
- Prepare journal entries to record the transactions above.
- Prepare journal entries to record the 2016 amortization expense.
- Prepare the intangible assets section of the balance sheet at December 31, 2016.
P10-1A.On January 1, 2015, the ledger of Accardo Company contains the following liability accounts.
Accounts Payable $52,000
Sales Taxes Payable 7,700
Unearned Service Revenue 16,000
During January, the following selected transactions occurred.
Jan. 5 Sold merchandise for cash totaling $20,520, which includes 8% sales taxes.
12Performed services for customers who had made advance payments of $10,000. (Credit Service Revenue.)
14Paid state revenue department for sales taxes collected in December 2014 ($7,700).
20Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax.
21Borrowed $27,000 from Girard Bank on a 3-month, 8%, $27,000 note.
25Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.
- Journalize the January transactions.
- Journalize the adjusting entry at January 31 for the outstanding note payable. (Hint: Use one-third of a month for the Girard Bank note.)
- Prepare the current liabilities section of the balance sheet at January 31, 2015. Assume no change in accounts payable.