please help 52

AC1220 Lab 5.1

 

Introduction

 

Jake determines that owning the building where Jake’s Computer Sales and Repair operates makes more sense than leasing the facility. On June 1, 20×1, Jake exchanges a $180,000 note payable for the following fixed assets:

 

·       Land

·       Land improvements, including fencing, paving, lighting, and signage

·       Building

 

Jake hires an independent appraiser who assigns the following market values to the assets:

 

 

Asset

Fair Market Value

Land

$23,500

Land improvements

$8,000

Building

$164,500

 

Requirement 1

Jake must allocate the $195,000 among three asset classes: land, land improvements, and building.

 

a.         Compute the total fair market value (FMV) of the lump-sum purchase of assets.

 

Asset

Fair Market Value

Land

$23,500

Land improvements

8,000

Building

164,000

Total

 

 

b.         Express land improvements and building as a percentage of the total FMV and allocate the purchase price of $180,000 to land improvements and building—the computation is completed for land.

Asset

Fair Market Value

% of Total Fair Market Value

Purchase Price

Cost of Asset

Land

$23,500

12%

$180,000

$21,600

Land improvements

 

 

180,000

 

Building

 

 

180,000

 

Total

 

 

 

 


c.         Journalize the purchase of the assets, using the allocated costs computed in Requirement 1b.

Date

Account and Explanation

Debit

Credit

6/1/x1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To record purchase of land, land improvements, and building

 

 

 

 

 

 

 

 

Requirement 2

a.         Classify each of the following spending items as either a capital expenditure or an expense. Indicate the correct choice with an “x”:

Spending

Capital Expenditure

Expense

Routine repairs to fencing, $120 (cash)

 

 

Renovation of building, including addition to warehouse, $15,000 (on account)

 

 

Resurfaced paving, extending the remaining useful life of the paving from 3 to 5 years, $1,000 (cash)

 

 

 

b.         Journalize the expenditures described in Requirement 2a.

Date

Account and Explanation

Debit

Credit

6/1/x1

 

 

 

 

 

 

 

 

To record repairs to fencing

 

 

6/1/x1

 

 

 

 

 

 

 

 

To record renovation of building

 

 

6/1/x1

 

 

 

 

 

 

 

 

To record extraordinary repair

 

 

 

 

 

 

 

 


Requirement 3

a.         Using the straight-line depreciation method, compute the depreciation expense and the accumulated depreciation that would be recorded at December 20×1. Completing the shaded cells in the following table:

Date

Asset Cost

Depreciable Cost

Straight-line Depreciation Rate

Depreciation Expense

Accumulated Depreciation

Book Value

Jun 1, 20×1

 

 

1/5 x 6/12

 

 

 

 

b.         Using the double-declining balance method, compute the depreciation expense and the accumulated depreciation that would be recorded at December 20×1. Complete the shaded cells in the following table:

Date

Asset Cost

Depreciable Cost

Double-Declining Depreciation Rate

Depreciation Expense

Accumulated Depreciation

Book Value

Jun 1, 20×1

 

 

 

 

 

 

 

c.         Assume that a truck is expected to be driven 7,000 miles through December 31, 20×1, and that each mile driven represents one production unit. Using the units-of-productions method, compute the depreciation expense and the accumulated depreciation that would be recorded at December 20×1. Complete the shaded cells in the following table:

Date

Asset cost

Depreciation per Unit

Number of Units

Depreciation Expense

Accumulated Depreciation

Book Value

Jun 1, 20×1

 

 

 

 

 

 

 

 

 

d.         Which of the three depreciation methods applied in Requirements 2a through 2c will result in the highest depreciation expense charge at December 31, 20×1? Determine the amount.

 


e.         Journalize the depreciation charge at December 31, 20×1, using the amount from Requirement 2c.

Date

Account and Explanation

Debit

Credit

6/1/x1

 

 

 

 

 

 

 

 

To record depreciation expense

 

 

 

 

 

 

 

 

 

 

Requirement 4

a.         On June 1, 20×1, Jake acquires a license for $6,000 in cash. The license grants Jake’s Computer Sales and Repair exclusive rights to sell the A-line tablet computers for four years. Journalize the acquisition cost of the license—an intangible asset.

Date

Account and Explanation

Debit

Credit

6/1/x1

 

 

 

 

 

 

 

 

To record acquisition cost of license

 

 

 

 

 

 

 

 

 

 

b.         Journalize the amortization expense related to the license for the six months ended Dec 31, 20×1.

Date

Account and Explanation

Debit

Credit

6/1/x1

 

 

 

 

 

 

 

 

To record amortization of license

 

 

 

 

 

 

 

 

 

 

c.         At what amount will the license be reported on the balance sheet at December 31, 20×1?