Question

1/1/17 Co buys land and pays $50,000 for the land, $500 for removal of scrap, $2500 for attorney’s fee (associated with land purchase), $2500 real estate commission, $5000 for accrued taxes and $1000 for current-year taxes. Journalize the land purchase.​​​​​​​   

Also on 1/1/17, Co buys a car and a computer. The car costs $25,000 , sales tax $2000 and insurance during delivery $1000. The car has an estimated 100,000 miles of useful life and a salvage value of $3000. The computer costs $3000, tax $400 and insurance during deliver of $100. The computer has and estimated useful life of 5 years and a salvage value of $500. Journalize the purchase of both.

                       

                      

On 12/31/17 the car has 10,000 miles on the odometer. Journalize the depreciation of the car using units of activity and the computer using straight-line.

                           

On 7/1/18 the car has 15,000 on the odometer and was sold for $25,250. Make the appropriate journal entries.

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12/31/18 Co exchanges computer for a new one and pays $500 cash in the trade. The fair market value of the old computer is $2000.   Remember the company is using straight line method for the computer. Make the appropriate journal entries.

               

1/1/19 Co pay $50,000 for a patent estimated to have a useful life of 10 years. Co also pays $10,000 research and development costs associated with the patent and $5000 legal costs to defend the patent in court. Make appropriate journal entries:

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If 5 years ago a company bought a $10,500 piece of equipment with $500 salvage value and 10 year usefull life and is using straight-line depreciation what is its book value now? If it revises estimated life to 15 years (10 more years left) what is revised annual depreciation?

What is the cost-allocation account for a natural resource?

On January 1, Company sells merchandise and collects $5000 in cash which includes 6% sales tax. Journalize the sale.

           

Company’s employees earned $20,000 for the pay period ending January 31. The Company withholds $1530 FICA, $4373 Federal Income Tax and $585 State Income Tax. Journalize the entry.

On January 1 Company issues a 5 year $1,000,000 face value bond with a 5% annual coupon paid semiannually. The company issues it for $916,884 for an effective interest rate of 7% and uses the effective-interest amortization method. Journalize the issuance:

What is the total cost of the borrowing over the life of the SSS bond?

Journalize the entry on July 1 to record SSS’s payment of interest and the amortization of the bond discount (assume no accrual was made June 30):

What is the accrual JE on 12/31?

On July 1 Incorporation issues a 10 year $2,000,000 face value bond with a 6% coupon paid semiannually. The Company issues it for $2,327,029 at an effective interest rate of 4%. Journalize the issuance.

Journalize the adjustments made by Incorporation on December 31 for the accrual of interest expense and the amortization of bond premium.

On February 1, ABC redeems its $3,000,000 face value bonds before maturity at a price of $2,600,000. The bonds were originally issued at a discount and currently the account Discount on Bond Payable has a debit balance of $500,000. Journalize the bond redemption.

Answer 1

1/1/17

1 LAND A/C DR $ 60,500

TO BANK A/C CR $ 60,500

Being the purchase of land along with other related expenditure incurred capitalised and accounted )

2. LAND TAX (CURRENT TAX) DR. $1000

TO BANK A/C CR $1000

( Being the current tax on the land paid accounted )

3. CAR A/C DR $ 28,000

TO BANK A/C CR $28,000

( Being the value of car purchased , salestax and insurance paid Accounted )

4. COMPUTER A/C DR $ 3,500

TO BANK A/C CR $ 3,500

( Being the value of computer ,sales tax and insurance accounted)

12/31/17

1. DEPRECIATION ON CAR A/C DR $ 2,500

DEPRECIATION ON COMPUTER A/C DR $ 600

TO CAR A/C CR $ 2,500

TO COMPUTER A/C CR $ 600

( Being the depreciation for the year on the assets accounted )

7/1/18

1. BANK A/C DR $ 25,250

DEPRECIATION ON CAR DR $ 1,250

TO CAR A/C CR $25,500

TO PROFIT ON SALE OF CAR CR $ 1,000

( Being the proceeds on sale of car , depreciation up to June 17 ,profit on sale of car accounted)

12/31/18

1. DEPRECIATION ON COMPUTER DR $ 600

TO COMPUTER A/C CR $ 600

( Depreciation for the year provided)

2. COMPUTER A/C DR $500

TO CASH A/C CR $ 500

( Being the cash paid for the new computer in exchange of the old one accounted )

NOTE : THERE IS NEED TO TAKE THE FAIR VALUE IN TO ACCOUNT SINCE IT IS ONLY AN EXCHAGE)

1/1/19

1. PATENT A/C DR $ 65,000

TO BANK A/C CR $ 65,000

( Being the cost , R&D cost and Legal fee to acquire the patent accounted)

2 .

COST OF EQUIPMENT ACQUIRED ON 1/1/14 $ 10,500

SALVAGE VALUE $ 500

ESTIMATED USEFUL LIFE 10 YRS

DEPRECIATION CHARGE FOR 5 YEARS = $ 1000 * 5 = $5,000

BOOK VALUE AS ON 1/1/19 = ( $ 10,500 - $5,000) = $ 5,500

REVISED ESTIMATED USEFUL LIFE 15 YRS

REVISED ANNUAL DEPRECIATION = ( $ 5,500 - $500 )/10 = $500

COST ALLOCATION ACCOUNT

The cost of a natural resource (less residual value ) is divided by the estimated units in the resource deposit. The resulting amount is depletion per unit. If all the resources are extracted during a period are sold , then depletion expense equals depletion per unit times the number of unit times the number of units extracted and sold.

1/1/19

1. CASH A/C DR $ 5,000

TO SALES A/C CR $4,717

TO SALES TAX COLLECTED CR $ 283

( Being the sales and collection of sales tax accounted )

2. WAGES A/C DR $20,000

TO CASH A/C CR $ 13,512

TO FICA CR $ 1,530

TO FIT CR $ 4,373

TO SIT CR $ 585

( Being the wages and recovery accountes for January )

NOTE : THE QUESTION IS TOO LENGTHY TO BE ANSWERED IN 2 HOURS. IT NEEDS MORE TIME THAN THE ALLOTTED.