1. On October 6,2011 Greenbelt Construction traded in an old tractor for a new truck, receiving a $56,000 trade in allowance and paying the remanning $164,000 in cash. The old tractor cost $190,000 and straight line amortization of $105,000 had been recorded as of October 6, 2011. Assume the fair value of the old tractor was equal to the trade in allowance.
a) What was the book value of the old tractor?
b) What is the gain or loss on the exchange?
c) What amount should be debited to the new Truck account?
d) Record the exchange
2.On January 2, 2011 Suzuki Service Co. disposed of a machine that cost $84,000
and had been amortized $45,250. Present the journal entries to record the disposal under each of the following unrelated assumptions:
a) The machine was sold for $32,500 cash
b) The machine was traded in on new tools having a $117,000 cash price. A $40,000 trade-in allowance was received and the balance was paid in cash
c) The machine plus $68,000 was exchanged for a cube van having a fair value of $104,000
d) The machine was traded for vacant land adjacent to the shop to be used as a parking lot. THe land had a fair value of $75,000 and Suzuki paid $25,000 cash in addition to giving the seller the machine.
3. Corey Boyd has devoted years to developing a profitable business that earns an attractive return. Boyd is now considering the possibility of selling the business to you and has calculated that a fair selling price is $720,000. You agree to pay this price. The following information is available:
Account Account Balance
December 31,2011 Fair Value
Current Assets $249,000 $236,000
Land 38,000 294,000
Building 52,000 690,000
Accumulated Amortization, building 46,000
Equipment 152,000 42,000
Accumulated Amortization, equipment 73,000
Total Liabilities 132,500 132,500
1.Prepare the entry to record your purchase of the business on January 1, 2012 assuming you paid cash of $100,000 and borrowed the balance.
2.Assume that on December 31,2014 management performed an impairment test on the goodwill calculated in Part 1. What is the appropriate entry if the fair value of the company was determined to be $520,000 and the net identifiable assets had a current fair value of $468,500.
4.Malaspina Touring Company runs boat tours along the west coast of British Columbia. It purchased on March 5, 2011 for cash of $690,000 a cruising boat with a useful life of 10 years or 13,250 hours with a residual value of $160,000. The company's year end is December 31.
Calculate the amortization expense for the fiscal years 2011, 2012, and 2013 by completing a schedule with the following headings(round to the nearest whole dollar)
Year Straight Line Double Declining Balance Units of production
a) Amortization is calculated to the nearest month
b) Assume actual hours of service were:
5.On January 1, 2011 Brodie purchased a used machine for $130,000. The next day, it was repaired at a cost of $3,390 and mounted on a new platform that cost $4,800. Management estimated that the machine would be used for seven year and would then have an $18,000 residual value. Amortization was to be charged on a straight line basis to the nearest whole month. A full year's amortization was charged on December 31, 2011, through to december 31, 2015 and on April 1, 2016 the machine was retired from service.
a) Prepare journal entries to record the purchase of the machine, the cost of repairing it, and the installation. Assume that cash was paid.
b) Prepare entries to record amortization on the machine on December 31, 2011 and on April 1, 2016(round calculation to the nearest whole dollar)
c) Prepare entries to record the retirement of the machine under each of the following unrelated assumptions:
i) it was sold for 30,000
ii) it was sold for 50,000
iii) It was destroyed in a fire and the insurance company paid $20,000 in full settlement of the loss claim.
The solution explains some questions relating to asset exchange, purchase and disposal