Question

Palmer Cook Productions manages and operates two rock bands. The company entered into the following transactions during a recent year. January 2 Purchased a tour bus for $96,000 by paying $34,000 cash and signing a $62,000 note due in two years. January 8 The bus was painted with the logos of the two bands at a cost of $350, on account. January 30 Wrote a check for the amount owed on account for the work completed on January 8. February 1 Purchased new speakers and amplifiers and wrote a check for the full $33,000 cost. February 8 Paid $250 cash to tune up the tour bus. March 1 Paid $34,000 cash and signed a $260,000 five-year note to purchase a small office building and land. An appraisal indicated that the building and land contributed equally to the total price. March 31 Paid $93,000 cash to acquire the goodwill and certain tangible assets of Kris’ Myth, Inc. The fair values of the tangible assets acquired were $23,000 for band equipment and $63,000 for recording equipment.

Required:

1-a.	Complete the table below, indicating the account, amount, and direction of the effect (+ for increase and ? for decrease) for the above transactions. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)
	TIP: Goodwill is recorded as the excess of the purchase price over the fair value of individual assets.

Record the purchase of a tour bus for $96,000, paying $34,000 cash and financing the rest.

2

Record the painting charges of $350 on account.

3

Record the payment in full for the painting charges.

4

Record the purchase of speakers and amplifiers for $33,000 cash.

5

Record the cash expense of $250 incurred to tune up the tour bus.

6

Record the purchase of a small office building and land for $34,000 cash and $260,000 five year note.

7

Record the purchase of goodwill and tangible assets for $93,000 cash.

For the tangible and intangible assets acquired in the preceding transactions, determine the amount of depreciation and amortization that Palmer Cook Productions should report for the quarter ended March 31. For convenience, the equipment and vehicle are depreciated the same way, using the straight-line method with a useful life of five years and no residual value. The building is depreciated using the double-declining-balance method, with a 10-year useful life and residual value of $34,000. (Do not round intermediate calculations).

TIP: Calculate depreciation from the acquisition date to the end of the quarter.

Record the depreciation expense for the three used machines at the end of the quarter.

Answer 1

1. To record purchase of bus
Date	Account Title	Debit	Credit
Jan.2	Vehicle	96000
	Cash		34000
	Note Payable		62000
2.To record the painting of the van
Date	Account Title	Debit	Credit
jan.8	Vehicle	350
	Accounts payable		350
3. To record the payment for the paintig job
Date	Account Title	Debit	Credit
Jan.30	Accounts payable	350	350
	Cash
4. To record purchase of speakers and amplifiers
Date	Account Title	Debit	Credit
Feb.1	Equipment	33000
	Cash		33000
5. To record the expese for tuning up the tour bus.
Date	Account Title	Debit	Credit
Feb.8	Repairs to vehicle	250
	Cash		250
6. To record purchase of land and ofice building
Date	Account Title	Debit	Credit
Mar.1	Land	147000
	Office Building	147000
	Cash		34000
	5-year Note payable		260000
7. To record purchase of music equipment
Date	Account Title	Debit	Credit
Mar.31	Equipment	86000
	Goodwill	7000
	Cash		93000
8. To record depreciation expense for the first quarter.
Date	Account Title	Debit	Credit
Mar.31	Depreciation Expense	8368
	Accumulated Depreciation - Vehicle		4818
	Accumulated Depreciation - Equipment		1100
	Accumulated Depreciation - Office Building		2450

Working:

Asset	Cost	Date of purchase	Period - current year	Life - Years	Dep.method	Dep.Rate	Depreciation
							for 1st quarter
Vehicle	96350	Jan.2	3 months	5	St.Line	20%	4818
Equipment	33000	Feb.1	2 months	5	St.Line	20%	1100
Office Building	147000	Mar.1	1 months	10	Double.Decl. Balance	20%	2450
Equipment	86000	Mar.31	0 months	5	St.Line	20%	0