Wiley plus week four | Business & Finance homework help

wiley plus week 4

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Intermediate Financial Accounting

Question 1

Wenner Furnace Corp. purchased machinery for $320,850 on May 1, 2012. It is estimated that it will have a useful life of 10 years, salvage value of $17,250, production of 276,000 units, and working hours of 25,000. During 2013, Wenner Corp. uses the machinery for 2,650 hours, and the machinery produces 29,325 units.

From the information given, compute the depreciation charge for 2013 under each of the following methods. (Round answers to 0 decimal places, e.g. $45,892.)

Question 2
Question 2

Conan O’Brien Logging and Lumber Company owns 4,000 acres of timberland on the north side of Mount Leno, which was purchased in 2000 at a cost of $610 per acre. In 2012, O’Brien began selectively logging this timber tract. In May of 2012, Mount Leno erupted, burying the timberland of O’Brien under a foot of ash. All of the timber on the O’Brien tract was downed. In addition, the logging roads, built at a cost of $157,000, were destroyed, as well as the logging equipment, with a net book value of $317,000.

At the time of the eruption, O’Brien had logged 20% of the estimated 500,000 board feet of timber. Prior to the eruption, O’Brien estimated the land to have a value of $210 per acre after the timber was harvested. O’Brien includes the logging roads in the depletion base.

O’Brien estimates it will take 3 years to salvage the downed timber at a cost of $710,200. The timber can be sold for pulp wood at an estimated price of $2 per board foot. The value of the land is unknown, but must be considered nominal due to future uncertainties.

(a) Determine the depletion cost per board foot for the timber harvested prior to the eruption of Mount Leno. (Round per unit answer to 2 decimal places, e.g. 0.45.)

Depletion cost per board foot

(b) Prepare the journal entry to record the depletion prior to the eruption. (Round per unit answer to 2 decimal places, e.g. 0.45 for computational purpose and final answer to 0 decimal places, e.g. $45,892. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 3

Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2011, the company expends $336,110 on a research project, but by the end of 2011 it is impossible to determine whether any benefit will be derived from it.

(a) The project is completed in 2012, and a successful patent is obtained. The R&D costs to complete the project are $128,610. The administrative and legal expenses incurred in obtaining patent number(NNN) NNN-NNNN84 in 2012 total $35,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2012. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

(To record research and development costs)

(To record legal and administrative costs)

(To record one year’s amortization expense)

(b) In 2013, the company successfully defends the patent in extended litigation at a cost of $40,320, thereby extending the patent life to December 31, 2020. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2013. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

(To record legal cost of successfully defending patent)

(To record one year’s amortization)

Question 4:
Question 4

Reichenbach Co., organized in 2011, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2012 and 2013.

Intangible Assets
7/1/12 8-year franchise; expiration date 6/30/19 $59,440
10/1/12 Advance payment on laboratory space (2-year lease) 24,740
12/31/12 Net loss for 2011 including state incorporation fee, $2,170,
and related legal fees of organizing, $6,090 (all fees incurred in 2011) 17,160
1/2/13 Patent purchased (10-year life) 85,850
3/1/13 Cost of developing a secret formula (indefinite life) 75,340
4/1/13 Goodwill purchased (indefinite life) 277,990
6/1/13 Legal fee for successful defense of patent purchased above 18,515
9/1/13 Research and development costs 159,000

Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2013, recording any necessary amortization and reflecting all balances accurately as of that date. (Ignore income tax effects.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round all answers to 0 decimal places, e.g. 8,564.)

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