please help 52
AC1220 Lab 5.1
Introduction
Jake determines that owning the building where Jake’s Computer Sales and Repair operates makes more sense than leasing the facility. On June 1, 20×1, Jake exchanges a $180,000 note payable for the following fixed assets:
· Land
· Land improvements, including fencing, paving, lighting, and signage
· Building
Jake hires an independent appraiser who assigns the following market values to the assets:
|
Asset |
Fair Market Value |
|
Land |
$23,500 |
|
Land improvements |
$8,000 |
|
Building |
$164,500 |
Requirement 1
Jake must allocate the $195,000 among three asset classes: land, land improvements, and building.
a. Compute the total fair market value (FMV) of the lump-sum purchase of assets.
|
Asset |
Fair Market Value |
|
Land |
$23,500 |
|
Land improvements |
8,000 |
|
Building |
164,000 |
|
Total |
|
b. Express land improvements and building as a percentage of the total FMV and allocate the purchase price of $180,000 to land improvements and building—the computation is completed for land.
|
Asset |
Fair Market Value |
% of Total Fair Market Value |
Purchase Price |
Cost of Asset |
|
Land |
$23,500 |
12% |
$180,000 |
$21,600 |
|
Land improvements |
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180,000 |
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Building |
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180,000 |
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Total |
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c. Journalize the purchase of the assets, using the allocated costs computed in Requirement 1b.
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Date |
Account and Explanation |
Debit |
Credit |
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6/1/x1 |
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To record purchase of land, land improvements, and building |
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Requirement 2
a. Classify each of the following spending items as either a capital expenditure or an expense. Indicate the correct choice with an “x”:
|
Spending |
Capital Expenditure |
Expense |
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Routine repairs to fencing, $120 (cash) |
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Renovation of building, including addition to warehouse, $15,000 (on account) |
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Resurfaced paving, extending the remaining useful life of the paving from 3 to 5 years, $1,000 (cash) |
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b. Journalize the expenditures described in Requirement 2a.
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Date |
Account and Explanation |
Debit |
Credit |
|
6/1/x1 |
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To record repairs to fencing |
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6/1/x1 |
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To record renovation of building |
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6/1/x1 |
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To record extraordinary repair |
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Requirement 3
a. Using the straight-line depreciation method, compute the depreciation expense and the accumulated depreciation that would be recorded at December 20×1. Completing the shaded cells in the following table:
|
Date |
Asset Cost |
Depreciable Cost |
Straight-line Depreciation Rate |
Depreciation Expense |
Accumulated Depreciation |
Book Value |
|
Jun 1, 20×1 |
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1/5 x 6/12 |
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b. Using the double-declining balance method, compute the depreciation expense and the accumulated depreciation that would be recorded at December 20×1. Complete the shaded cells in the following table:
|
Date |
Asset Cost |
Depreciable Cost |
Double-Declining Depreciation Rate |
Depreciation Expense |
Accumulated Depreciation |
Book Value |
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Jun 1, 20×1 |
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c. Assume that a truck is expected to be driven 7,000 miles through December 31, 20×1, and that each mile driven represents one production unit. Using the units-of-productions method, compute the depreciation expense and the accumulated depreciation that would be recorded at December 20×1. Complete the shaded cells in the following table:
|
Date |
Asset cost |
Depreciation per Unit |
Number of Units |
Depreciation Expense |
Accumulated Depreciation |
Book Value |
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Jun 1, 20×1 |
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d. Which of the three depreciation methods applied in Requirements 2a through 2c will result in the highest depreciation expense charge at December 31, 20×1? Determine the amount.
e. Journalize the depreciation charge at December 31, 20×1, using the amount from Requirement 2c.
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Date |
Account and Explanation |
Debit |
Credit |
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6/1/x1 |
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To record depreciation expense |
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Requirement 4
a. On June 1, 20×1, Jake acquires a license for $6,000 in cash. The license grants Jake’s Computer Sales and Repair exclusive rights to sell the A-line tablet computers for four years. Journalize the acquisition cost of the license—an intangible asset.
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Date |
Account and Explanation |
Debit |
Credit |
|
6/1/x1 |
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To record acquisition cost of license |
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b. Journalize the amortization expense related to the license for the six months ended Dec 31, 20×1.
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Date |
Account and Explanation |
Debit |
Credit |
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6/1/x1 |
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To record amortization of license |
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c. At what amount will the license be reported on the balance sheet at December 31, 20×1?
