ACC 291 Week 2

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E9-1

The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2011.

1. Paid $5,000 of accrued taxes at time plant site was acquired.
2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit.
3. Paid $850 sales taxes on new delivery truck.
4. Paid $17,500 for parking lots and driveways on new plant site.
5. Paid $250 to have company name and advertising slogan painted on new delivery truck.
6. Paid $8,000 for installation of new factory machinery.
7. Paid $900 for one-year accident insurance policy on new delivery truck.
8. Paid $75 motor vehicle license fee on the new truck.

Instructions

(a) Explain the
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Instructions

(a) Compute depreciation expense for 2011 and 2012 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining balance method.
Pg. 404-407

Straight-line method- 30,000- 2,000 = 28,000 / 8 = $3,500 annually
2011- $ 3,500---- worth $26,500
2012- $ 3,500---- worth $23,000

Units-of-activity method- 28,000/100,000= $0.28 unit
2011- $0.28 x 15,000 = $4,200
2011- $0.28 x 12,000= $3,360

Double-declining balance method
2011- 30,000 x 12.5% (100/8) = $3,750
2012- 26,250 (30,000 – 3,750) x 12.5% = $3,281.35

(b) Assume that Brainiac uses the straight-line method.

(1) Prepare the journal entry to record 2011 depreciation.
Pg 405

Date Account Title & Explanation Debit Credit

Jan. 31 Depreciation Expense 3,500
Accumulated Depreciation 3,500 (To record annual depreciation on delivery truck) (2) Show how the truck would be reported in the December 31, 2011, balance sheet.

Date Account Title & Explanation Debit Credit

Dec. 31 Equipment Expenses 26,500 Equipment Depreciation 26,500 (To record annual depreciation on delivery truck)

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
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