Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 10, Problem 10.5E
Intangibles
• LO10–1
In 2018, Bratten Fitness Company made the following cash purchases:
1. The exclusive right to manufacture and sell the X-Core workout machine from Symmetry Corporation for $200,000. Symmetry created the unique design for the machine. Bratten also paid an additional $10,000 in legal and filing fees to attorneys to complete the transaction.
2. An initial fee of $300,000 for a three-year agreement with Silver’s Gym to use its name for a new facility in the local area. Silver’s Gym has locations throughout the country. Bratten is required to pay an additional fee of $5,000 for each month it operates under the Silver’s Gym name, with payments beginning in March 2018. Bratten also purchased $400,000 of exercise equipment to be placed in the new facility.
3. The exclusive right to sell Healthy Choice, a book authored by Kent Patterson, for $25,000. The book includes healthy recipes, recommendations for dietary supplements, and natural remedies. Bratten plans to display the book at the check-in counter at its new facility, as well as make it available online.
Required:
Prepare a summary
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
P11.1
(LO 2 ) (Depreciation for Partial Period—SL, SYD, and DDB) Alladin Company purchased Machine #201 on May 1, 2020. The following information relating to Machine #201 was gathered at the end of May.
Price
$85,000
Credit terms
2/10, n/30
Freight-in
$ 800
Preparation and installation costs
$ 3,800
Labor costs during regular production operations
$10,500
It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,500. The invoice for Machine #201 was paid May 5, 2020. Alladin uses the calendar year as the basis for the preparation of financial statements.
Instructions
a.
Compute the depreciation expense for the years indicated using the following methods. (Round to the nearest dollar.)
1.Straight-line method for 2020.
2.Sum-of-the-years'-digits method for 2021.…
CA10.3 (LO 2) (Capitalization of Interest) Vania Magazines started construction of a warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2019, and completed the building on December 31, 2019. During the construction period, Vania has the following debt obligations outstanding.
Construction loan—12% interest, payable semiannually, issued December 31, 2018
$2,000,000
Short-term loan—10% interest, payable monthly, and principal payable at maturity, on May 30, 2020
1,400,000
Long-term loan—11% interest, payable on January 1 of each year; principal payable on January 1, 2022
1,000,000
Total cost amounted to $5,200,000, and the weighted average of accumulated expenditures was $3,500,000.
Jane Esplanade, the president of the company, has been shown the costs associated with this construction project and capitalized on the balance sheet. She is bothered by the “avoidable interest” included in the cost. She argues that, first, all the…
P10.1
(LO 1 ) (Classification of Acquisition and Other Asset Costs) At December 31, 2019, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet had the following balances.
Land
$230,000
Buildings
890,000
Leasehold improvements
660,000
Equipment
875,000
During 2020, the following transactions occurred.
1.Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000.
2.A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the…
Chapter 10 Solutions
Intermediate Accounting
Ch. 10 - Prob. 10.1QCh. 10 - Prob. 10.2QCh. 10 - Prob. 10.3QCh. 10 - Prob. 10.4QCh. 10 - Prob. 10.5QCh. 10 - Prob. 10.6QCh. 10 - When an asset is acquired and a note payable is...Ch. 10 - Explain how assets acquired in exchange for equity...Ch. 10 - Prob. 10.9QCh. 10 - What account is credited when a company receives...
Ch. 10 - Prob. 10.11QCh. 10 - Identify the two exceptions to valuing property,...Ch. 10 - In what situations is interest capitalized?Ch. 10 - Define average accumulated expenditures and...Ch. 10 - Explain the difference between the specific...Ch. 10 - Prob. 10.16QCh. 10 - Prob. 10.17QCh. 10 - Explain the accounting treatment of costs incurred...Ch. 10 - Explain the difference in the accounting treatment...Ch. 10 - Prob. 10.20QCh. 10 - Prob. 10.21QCh. 10 - Prob. 10.22QCh. 10 - Prob. 10.23QCh. 10 - Acquisition cost; machine LO101 Beavert on Lumber...Ch. 10 - Prob. 10.2BECh. 10 - Prob. 10.3BECh. 10 - Cost of a natural resource; asset retirement...Ch. 10 - Asset retirement obligation LO101 Refer to the...Ch. 10 - Prob. 10.6BECh. 10 - Acquisition cost; noninterest-bearing note LO103...Ch. 10 - Prob. 10.8BECh. 10 - Fixed-asset turnover ratio LO105 Huebert...Ch. 10 - Fixed-asset turnover ratio; solve for unknown ...Ch. 10 - Prob. 10.11BECh. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Nonmonetary exchange LO106 Refer to the situation...Ch. 10 - Prob. 10.14BECh. 10 - Prob. 10.15BECh. 10 - Research and development LO108 Maxtor Technology...Ch. 10 - Prob. 10.17BECh. 10 - Research and development; various types LO108...Ch. 10 - Prob. 10.19BECh. 10 - Acquisition costs; land and building LO101 On...Ch. 10 - Acquisition cost; equipment LO101 Oaktree Company...Ch. 10 - Prob. 10.3ECh. 10 - Cost of a natural resource; asset retirement...Ch. 10 - Intangibles LO101 In 2018, Bratten Fitness...Ch. 10 - Goodwill LO101 On March 31, 2018, Wolfson...Ch. 10 - Prob. 10.7ECh. 10 - Prob. 10.8ECh. 10 - Prob. 10.9ECh. 10 - Acquisition costs; noninterest-bearing note ...Ch. 10 - Prob. 10.11ECh. 10 - Prob. 10.12ECh. 10 - Prob. 10.13ECh. 10 - Prob. 10.14ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.16ECh. 10 - Nonmonetary exchange LO106 [This is a variation...Ch. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - FASB codification research LO101, LO106, LO107,...Ch. 10 - Prob. 10.22ECh. 10 - Interest capitalization LO107 On January 1, 2018,...Ch. 10 - Interest capitalization LO107 On January 1, 2018,...Ch. 10 - Interest capitalization; multiple periods LO107...Ch. 10 - Research and development LO108 In 2018, Space...Ch. 10 - Prob. 10.27ECh. 10 - IFRS; research and development LO108, LO109...Ch. 10 - IFRS; research and development LO109 IFRS NXS...Ch. 10 - Prob. 10.30ECh. 10 - Software development costs LO108 Early in 2018,...Ch. 10 - Prob. 10.32ECh. 10 - Intangibles; start-up costs LO101, LO108 Freitas...Ch. 10 - Prob. 10.34ECh. 10 - Prob. 10.1PCh. 10 - Prob. 10.2PCh. 10 - Prob. 10.3PCh. 10 - Prob. 10.4PCh. 10 - Acquisition costs; journal entries LO101, LO103,...Ch. 10 - Prob. 10.6PCh. 10 - Nonmonetary exchange LO106 On September 3, 2018,...Ch. 10 - Prob. 10.8PCh. 10 - Interest capitalization; specific interest method ...Ch. 10 - Prob. 10.10PCh. 10 - Research and development LO108 In 2018,...Ch. 10 - Prob. 10.12PCh. 10 - Judgment Case 101 Acquisition costs LO101, LO103,...Ch. 10 - Research Case 102 FASB codification; locate and...Ch. 10 - Judgment Case 103 Self-constructed assets LO107...Ch. 10 - Judgment Case 104 Interest capitalization LO107...Ch. 10 - Prob. 10.6BYPCh. 10 - Prob. 10.7BYPCh. 10 - Judgment Case 108 Research and development LO108...Ch. 10 - Prob. 10.9BYPCh. 10 - Prob. 10.11BYPCh. 10 - Ethics Case 1012 Research and development LO108...Ch. 10 - Prob. 10.13BYPCh. 10 - Prob. 10.14BYPCh. 10 - Prob. 10.15BYPCh. 10 - Prob. 10.16BYPCh. 10 - Continuing Cases Target Case LO101, LO105 Target...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- P11.11 (LO4) (Mineral Resources) Phelps Oil Wildcatters plc has leased property on whichoil has been discovered. Wells on this property produced 36,000 barrels of oil during thepast year, which sold at an average sales price of £65 per barrel. Total oil resources of thisproperty are estimated to be 500,000 barrels. The lease provided for an outright payment of£1,200,000 to the lessor (owner) before drilling could be commenced and an annual rental of £62,000. A premium of 4% of the sales price of every barrel of oil removed is to be paidannually to the lessor. In addition, Phelps (lessee) is to clean up all the waste and debrisfrom drilling and to bear the costs of reconditioning the land for farming when the wells areabandoned. The estimated fair value, at the time of the lease, of this clean-up andreconditioning is £50,000.Instructionsa. From the provisions of the lease agreement, compute the cost per barrel for the pastyear, exclusive of operating costs, to Phelps.b. Compute the…arrow_forwardP10.5 (LO 2, 3, 5), AP At December 31, 2022, Grand Company reported the following as plant assets. Land $4,000,000Buildings $28,500,000 Less: Accumulated depreciation—buildings 12,100,000 16,400,000Equipment 48,000,000 Less: Accumulated depreciation—equipment 5,000,000 43,000,000Total plant assets $63,400,000During 2023, the following selected cash transactions occurred. April 1 Purchased land for $2,130,000.May 1 Sold equipment that cost $750,000 when purchased on January 1, 2019. The equipment was sold for $450,000.June 1 Sold land purchased on June 1, 2013 for $1,500,000. The land cost $400,000.July 1 Purchased equipment for $2,500,000.Dec. 31 Retired equipment that cost $500,000 when purchased on December 31, 2013.arrow_forwardProblem # 1 (30): Given: On Sep 1, 2017 General Assembly (GA) purchased for $980,000 an ANSONIA 7300 wide-corridor stacking modulator with the expectation that its economic life would be exhausted at 2024 12 31 and that the unit’s salvage value would be $320,000. On 2020 11 01 GA exchanged the equipment for a 4-year, zero-coupon note with a face value of $900,000. GA recognized a loss of $16,100 on the transaction. GA uses SLN for depreciation and prorating for partial periods. Required: Book the 12/31/2020 interest accrual for the note.arrow_forward
- hrk.4 Orange Music purchased the rights to all Fixing Benjamin's music on January 1st, 2022, for $1 million cash. On December 31st, 2022, a change in consumer tastes over the year led to the determination that future sales of Fixing Benjamin’s discography would be significantly lower than expected. One accountant estimated that music sales for the years 2023, 2024, and 2025 would be $300,000, $200,000, and $100,000, respectively, and mentioned that the appropriate discount rate for Orange Music is 7%. Record all journal entries of Orange Music for the year 2022.arrow_forwardProblem 13NOREEN INC, a truck dealer, sells a truck on January 1, 2019, to MENDOZA INC for P3,000,000. NOREEN agrees to repurchase the truck on December 31, 2020 for P3,630,000. How much should NOREEN INC record interest and retirement of its liability to MENDOZAINC on December 31, 2020?None C. 330,000; 3,630,000 300,000; 3,600,000 D. 630,000; 3,630,000arrow_forwardshj.8 A company is considering the purchase of a new production machine and is not sure whether the project fulfills its investment objective. The company requires that all investments must have a positive net present value (NPV). The machine costs $100,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of five years. The machine has a $0 salvage value. The project will generate $30,000 of pretax operating cash inflow annually. The company has a 25% effective income tax rate and uses a 10% discount rate for investment projects. Which of the following represents the NPV of the project? Select one: a. $(14,707) b. $(33,661) c. $13,724 d. $4,246arrow_forward
- Intermediate Accounting ll ch 16 5. On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of $48 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2023, the book value of the equipment was $42 million and its tax basis was $32 million. At December 31, 2024, the book value of the equipment was $40 million and its tax basis was $25 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2024 was $30 million. Required: Prepare the appropriate journal entry to record Ameen’s 2024 income taxes. Assume an income tax rate of 25%. What is Ameen’s 2024 net income?arrow_forwardMCQ'S: 26) Anderson Clayton will purchase a new pellet mill that will replace an older, less efficient mill. The new mill costs $360,000 and shipping costs are $10,000. Improving the steam lines to the new mill will cost an additional $22,000. The old mill has a book value of $25,000 and can be sold for $12,000. The installation of the new mill will cause inventories to increase by $8,000, accounts receivable will go up $20,000, and accounts payable will increase $10,000. If Anderson Clayton has a marginal tax rate of 40%, what is the NINV for the new mill? a.$412,800 b.$392,800 . c.$374,800 d.$398,000 27) According to Value Line, Bestway has a beta of 1.15. If 3-month Treasury bills currently yield 7.9% and the market risk premium is estimated to be 8.3%, what is Bestway's cost of equity capital? a.16.2% b.8.36% c.17.45% . d.9.55% 28) Determine the pure project…arrow_forwardQ) 1 Blatt Packing Co. is examining the investment in a new air-conditioning system in its factory. The initial cost is £100,000, and it is expected to sell the system for scrap after five years at a salvage value of £20,000. The equipment will be depreciated on a straight-line basis for tax purposes. The tax rate is 40 per cent, with no tax payable on the salvage value. The investment requires an increase in net working capital of £5,000 at the outset. There is no increase in revenues expected, but there is expected to be a saving of £40,000 per year in before-tax operating costs. a. Estimate the cash flows involved in the project. b. If the firm’s cost of capital is 8 per cent, should the firm invest in the system? c. How would the decision above be affected if the firm’s bond rating was reduced and its cost of capital changed to 10 per cent?arrow_forward
- Problem 10-9 (Algo) Interest capitalization; specific interest method [LO10-7]On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2022. Expenditures on the project were as follows:January 1, 2021$1,280,000March 1, 2021720,000June 30, 2021920,000October 1, 2021720,000January 31, 2022288,000April 30, 2022621,000August 31, 2022918,000 On January 1, 2021, the company obtained a $3,200,000 construction loan with a 15% interest rate. The loan was outstanding all of 2021 and 2022. The company’s other interest-bearing debt included two long-term notes of $3,000,000 and $7,000,000 with interest rates of 11% and 13%, respectively. Both notes were outstanding during all of 2021 and 2022. Interest is paid annually on all debt. The company’s fiscal year-end is December 31. Required:1. Calculate the amount of interest that Mason should capitalize in 2021 and 2022 using the specific…arrow_forwardExercise 9.11 (Algo) Depletion of Natural Resources (LO9-7) Salter Mining Company purchased the Northern Tier Mine for $88 million cash. The mine was estimated to contain 1.45 million tons of ore and to have a residual value of $1.4 million. During the first year of mining operations at the Northern Tier Mine, 95,000 tons of ore were mined, of which 18,000 tons were sold. a. Prepare a journal entry to record depletion during the year. b. Show how the Northern Tier Mine, and its accumulated depletion, would appear in Salter Mining Company's balance sheet after the first year of operations.arrow_forwardCH 5#9 The A Corporation is considering the construction of a new plant to build a component part that it is currently purchasing. It has the following information. Item Cost Expected life Plant $20,000,000 40 years Utilities 10,000,000 20 years Equipment 15,000,000 10 years The operating costs are estimated at $5 million per year, assuming an output of 1 million units of product per year. The corporation uses a discount rate of 0.05. It can purchase the product at a cost of $10 per unit. Should the new plant be built (on a straight economic basis)?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Property, Plant and Equipment (PP&E) - Introduction to PPE; Author: Gleim Accounting;https://www.youtube.com/watch?v=e_Hx-e-h9M4;License: Standard Youtube License