Exercise 10-17 Partial-year depreciation; disposal of plant asset LO P2

Assignment:

Week 7

1.

Exercise 10-17 Partial-year depreciation; disposal of plant asset LO P2

Rayya Co. purchases and installs a machine on January 1, 2013, at a total cost of $92,800. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is disposed of on July 1, 2017, during its fifth year of service.

Prepare entries to record the partial year’s depreciation on July 1, 2017.

Prepare entries to record the disposal under the following separate assumptions:

(1)

The machine is sold for $43,036 cash.

(2)

Rayya receives an insurance settlement of $38,976 resulting from the total destruction of the machine in a fire.

2.

Exercise 10-18 Depletion of natural resources LO P1, P3

On April 2, 2013, Montana Mining Co. pays $3,888,210 for an ore deposit containing 1,535,000 tons. The company installs machinery in the mine costing $188,300, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Montana begins mining on May 1, 2013, and mines and sells 130,700 tons of ore during the remaining eight months of 2013.

Prepare the December 31, 2013, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion.(Round your unit depreciation and depletion rates to 2 decimal places.)

Exercise 10-24A Recording plant asset disposals LO P2, P5

[The following information applies to the questions displayed below.]

On January 2, 2013, Bering Co. disposes of a machine costing $38,900 with accumulated depreciation of $20,955. Prepare the entries to record the disposal under each of the following separate assumptions.

3.

Exercise 10-24A Part 1

1.

The machine is sold for $15,050 cash.

4.

Problem 10-1A Plant asset costs; depreciation methods LO C1, P1

Timberly Construction negotiates a lump-sum purchase of several assets from a company that is going out of business. The purchase is completed on January 1, 2013, at a total cash price of $810,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $492,900; land, $297,600; land improvements, $74,400; and four vehicles, $65,100. The company’s fiscal year ends on December 31.

Required:

1.1

Prepare a table to allocate the lump-sum purchase price to the separate assets purchased.

1.2

Prepare the journal entry to record the purchase.

2.

Compute the depreciation expense for year 2013 on the building using the straight-line method, assuming a 15-year life and a $30,000 salvage value.

3.

Compute the depreciation expense for year 2013 on the land improvements assuming a five-year life and double-declining-balance depreciation.

5.

Problem 10-5A Depreciation methods LO P1

A machine costing $211,000 with a four-year life and an estimated $17,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 485,000 units of product during its life. It actually produces the following units: year 1, 121,600; year 2, 123,700; year 3, 119,800; and year 4, 129,900. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)

Required:

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method.(Round your per unit depreciation to 2 decimal places.)

6.

Problem 10-7A Natural resources LO P3

On July 23 of the current year, Dakota Mining Co. pays $6,660,000 for land estimated to contain 9,000,000 tons of recoverable ore. It installs machinery costing $1,260,000 that has a 10-year life and no salvage value and is capable of mining the ore deposit in eight years. The machinery is paid for on July 25, seven days before mining operations begin. The company removes and sells 464,250 tons of ore during its first five months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine’s depletion as the machinery will be abandoned after the ore is mined.

Required:

Prepare entries to record the following.(Do not round your intermediate calculations.):

(a)

To record the purchase of the land.

(b)

To record the cost and installation of machinery.

(c)

To record the first five months’ depletion assuming the land has a net salvage value of zero after the ore is mined.

(d)

To record the first five months’ depreciation on the machinery.

Exercise 11-5 Interest-bearing notes payable with year-end adjustments LO P1

[The following information applies to the questions displayed below.]

Keesha Co. borrows $220,000 cash on December 1, 2013, by signing a 150-day, 9% note with a face value of $220,000.

7.

Exercise 11-5 Part 1

1.

On what date does this note mature?

8.

Exercise 11-5 Parts 2. & 3.

2. & 3.

What is the amount of interest expense in 2013 and 2014 from this note?(Use 360 days a year. Do not round intermediate calculations.)

9.

Exercise 11-5 Part 4

4(a)

Prepare journal entry to record issuance of the note on November 1, 2013.

4(b)

Prepare journal entry to record accrual of interest at the end of 2013.(Use 360 days a year.)

4(c)

Prepare journal entry to record payment of the note at maturity. assuming no reversing entries were made on January 1.

10.

Exercise 11-8 Payroll-related journal entries LO P3

BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $110,100 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.8% and SUTA taxes are 2.9% of the first $7,000 paid to its employee.

Gross Pay through August

Gross Pay for September

a.

$

6,640

$

830

Prepare the employer’s September 30 journal entries to record theemployer’spayroll taxes expense and its related liabilities.(Round your answers to 2 decimal places.)

Exercise 11-9 Warranty expense and liability computations and entries LO P4

[The following information applies to the questions displayed below.]

Hitzu Co. sold a copier costing $4,500 with a two-year parts warranty to a customer on August 16, 2013, for $9,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2014, the copier requires on-site repairs that are completed the same day. The repairs cost $123 for materials taken from the Repair Parts Inventory. These are the only repairs required in 2014 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjusting entry at the end of each year.

11.

Exercise 11-9 Part 5

5(a)

Prepare journal entries to record the copier’s sale.

5(b)

Prepare journal entry to record the adjustment on December 31, 2013, to recognize the warranty expense.

5(c)

Prepare journal entry to record the repairs that occur in November 2014.

Problem 11-1A Short-term notes payable transactions and entries LO P1

[The following information applies to the questions displayed below.]

Tyrell Co. entered into the following transactions involving short-term liabilities in 2012 and 2013.

2012

Apr. 20

Purchased $38,500 of merchandise on credit from Locust, terms are 1/10, n/30. Tyrell uses the perpetual inventory system.

May 19

Replaced the April 20 account payable to Locust with a 90-day, $35,000 note bearing 7% annual interest along with paying $3,500 in cash.

July 8

Borrowed $69,000 cash from National Bank by signing a 120-day, 12% interest-bearing note with a face value of $69,000.

__?__

Paid the amount due on the note to Locust at the maturity date.

__?__

Paid the amount due on the note to National Bank at the maturity date.

Nov. 28

Borrowed $33,000 cash from Fargo Bank by signing a 60-day, 8% interest-bearing note with a face value of $33,000.

Dec. 31

Recorded an adjusting entry for accrued interest on the note to Fargo Bank.

2013

__?__

Paid the amount due on the note to Fargo Bank at the maturity date.

12.

Problem 11-1A Part 1

Required:

1.

Determine the maturity date for each of the three notes described.

13.

Problem 11-1A Part 2

2.

Determine the interest due at maturity for each of the three notes.(Do not round your intermediate calculations. Use 360 days a year.)

14.

Problem 11-1A Part 3

3.

Determine the interest expense to be recorded in the adjusting entry at the end of 2012.(Do not round your intermediate calculations.Use 360 days a year.)

15.

Problem 11-1A Part 4

4.

Determine the interest expense to be recorded in 2013.(Do not round your intermediate calculations. Use 360 days a year.)

16.

Problem 11-1A Part 5

5.1

Prepare journal entries for all the preceding transactions and events for years 2012.(Do not round your intermediate calculations.)

5.2

Prepare journal entries for all the preceding transactions and events for years 2013.(Do not round your intermediate calculations.)