ACCT2110 Financial Accounting Chapter Nine Long-Lived Assets Homework
Problem 1. On March 1, 2018, Geoffrey Company acquired real estate, on which it planned to construct a small office building, by paying $90,000 in cash. An old warehouse on the property was demolished at a cost of $ 8,200; the salvaged materials were sold for $1,700. (SO 1) Additional expenditures before construction began included $1,500 attorney’s fee for work concerning the land purchase, $5,000 real estate broker’s fee, $9,100 architect’s fee, and $14,000 to put in driveways and a parking lot.
Instructions
(a) Determine the amount to be reported as the cost of the land.
(b) Make the journal entry to record the purchase of the land.
(c) For each cost not used in part (a), indicate the account to be debited.
Problem 2. Phil Co. has delivery equipment that cost $54,000 on January 1, 2014. The delivery equipment is expected to have a useful life of 10 years with a salvage of $4,000. Phil uses a straight-line depreciation method.
Instructions
Record entries for the disposal of the delivery equipment on July 1, 2018 under the following assumptions.
(a) It was scrapped as having no value.
(b) It was sold for $37,000.
(c) It was sold for $ 18,000.
Problem 3. During 2018 Federal Express reported the following information (in millions): net sales of $24,710 and net income of $838. Its balance sheet also showed total assets at the beginning of the year of $15,385 and total assets at the end of the year of $19,134.
Instructions
Calculate the (a) asset turnover ratio and (b) return on assets ratio.
Problem 4. Keshawn Company, organized in 2017, has these transactions related to intangible assets in that year:
| Jan. 2 | Purchased a patent (5-year life) $330,000. |
| Apr. 1 | Goodwill purchased (indefinite life) $360,000. |
| July 1 | Acquired a 9-year franchise $450,000. |
| Sept. 1 | Research and development costs $185,000. |
Instructions
(a) Prepare the necessary entries to record these intangibles. All costs incurred were for cash.
(b) Make the entries as of December 31, 2017, recording any necessary amortization.
(c) Indicate what the balances should be on December 31, 2017.
