ACC 330 Summer 18 Chapter 10 On April 1 2018 ABC purchased a

ACC 330 -Summer 18 Chapter 10 On April 1, 2018, ABC purchased an existing factory for 2 million. The included title to land, the factory building, manufacturing equipment, 8 were: on a process the equipment uses. At the time of the purchase, the assets and a patent fair value Land Buildir $400k $620k Equipment $780k Patent $450k The company placed the assets into use on May 1, 2018 and decided that salvage value and estimate life of the assets purchased would be: Estimate Life-(vrs.) N/A 40 20 20 Salvage Value Land Building Equipment Patent N/A 120k 80k 150k On November 1, 2022, management decided that the salvage value originally estimated on the building should be 200k instead of 120k After suffering recurring losses due to changes in manufacturing laws and continuous increases in on imported goods), management decided to sell the equipment and patent. On January 1s, 2023, management sold the Equipment and patent to XYZ manufacturing company for $400k and $300k respectively. the cost of raw material (due to the increase tariffs placed Us the above information to answer the following questions: 1) At what price were the assets recorded on ABC booked when purchased orn April 1st 2018. 2) What is the depreciation expense for 2018 if the company used: a. Straight line depreciation, and Double declining balance depreciation. b. What is the depreciation expense reported in the Income Statement for the period ending Deceimber 31, 2022, after management had a change in estimate? 3) 4) Record the sale of the Equipment and Patent on January 1\", 2023.

Solution

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Part-1 Asset Fair Value Record Value Working Land 400000 355556 2000000/2250000*400000 Building 620000 551111 2000000/2250000*620000 Equipment 780000 693333 2000000/2250000*780000 Patent 450000 400000 2000000/2250000*450000 Total 2250000 2000000 Part-2a A B C (A-B)/C SLM Asset Record Value Salvage Value Life Depreciation Full Year Depreciation 11 Months Land 355556 Building 551111 120000 40 10778 9880 Equipment 693333 80000 20 30667 28111 Patent 400000 150000 20 12500 11458 Total 2000000 Part-2b A B C 1/Life D A*D=E E*8/12 Asset Record Value Salvage Value Life Rate of Dep Double Rate Depreciation-Full Year Depreciation 11 Months Land 355556 Building 551111 120000 40 2.5% 5.0% 27556 25259 Equipment 693333 80000 20 5.0% 10.0% 69333 63556 Patent 400000 150000 20 5.0% 10.0% 40000 36667 Total 2000000 Part-3 SLM Building Cost 551111 Less: Depreciation 2018 9880 2019 10778 2020 10778 2021 10778 2022 Till Oct 6287 6287 Book Value on 1st Nov 502611 Less: Revised Salvage Value 120000 Depriciable Value 382611 Remaining Life 427 Months (40*12)-(53) Depreciation for 5 Month 2022 382611/427*5 4480 Building Dep in 2022 10767 Equipment Dep 2022 30667 Patent Dep 2022 12500 Part-4 Debit Credit Cash 400000 Accumulated Depreciation 61044 Loss on Sale of Equipment 90067 Equipment 551111 490067 Cash 300000 Accumulated Amortization 186667 Profit on Sale of Patent 86667 Patent 400000 Working Equipment Book Value on 1 Jan 2023 Cost 551111 Less: Depreciation 2018 9880 2019 10778 2020 10778 2021 10778 2022 Till Oct 6287 2022 Till Nov-Mar 4480 2023 April-Dec 8064 382611/427*9 Book Value as on 1st Jan 2023 490067 Sale Value 400000 Loss 90067 Working Patent Cost 400000 Less: Dep 2018 36667 2019 40000 2020 40000 2021 40000 2023-9 Months 30000 Total Depreciation 186667 Book Value 213333 Sale Value 300000 Profit 86667