E1-23 Hootie and the Blow Fish, Inc., organized in 2002, has the following transactions related to intangible assets.
1/2/02 Purchased patent (7-year life) $490,000
4/1/02 Goodwill purchased (indefinite life) 360,000
7/1/02 10-year franchise; expiration date 7/1/2012 420,000
9/1/02 Research and development costs 185,000
Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make
the entries as of December 31, 2002, recording any necessary amortization and reflecting all balances accurately as of that date.
P1-8B In recent years, Letterman Company purchased three machines. Because of heavy
turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods were selected. Information concerning the machines is summarized below.
Machine Acquired Cost Salvage Value Useful Life Depreciation
In Years Method
1 1/1/99 96,000 6k 10 Straight-line
2 1/1/00 60,000 10k 8 Declining Balance
3 11/1/02 66,000 6k 6 Units of activity
For the declining-balance method, the company uses the double-declining rate. For the units of-activity method, total machine hours are expected to be 24,000. Actual hours of use in the first 3 years were: 2002, 1,000; 2003, 4,500; and 2004, 5,000.
(a) Compute the amount of accumulated depreciation on each machine at December 31, 2002.
(b) If machine 2 had been purchased on April 1 instead of January 1, what would be the depreciation expense for this machine in (1) 2000 and (2) 2001?
E1-23 Hootie and the Blow Fish, Inc., organized in 2002, has the following transactions related to intangible ...
Depreciation Methods (Declining Balance, Double Declining, Straight Line) are investigated. Intangible Assets are also discussed. The solution is detailed and well presented.