ACC 240
Jackson College
Test #3 Name:
Michelle Curtis Due date:
Thursday midnight 5/4/17 Certify your work on Test #3 for ACC 240:
Take a few minutes to reflect on your work with this test. Then, write two responses: (1) Describe how you completed the
test, describe your process. (2) Make a statement including an electronic signature indicating that the work submitted
under your name for this exam is your work alone.
I completed this in my bed and on my couch. All the work/information provided within this doucument is my work. Test #3 components and points:
Problem #1 PPE Matching
Problem #2 PPE Acquisition
Problem #3 Journal entries for exchange of fixed assets
Problem #4 Depreciation calculations
Problem #5 Depletion case
Problem #6 Goodwill case
Problem #7 Patent case
Problem #8 Writing on ethics and also on ACC 240 Possible
Points:
10
10
15
15
10
10
20
10
100 Directions:
Complete this exam using your resources including textbook, notes and online research. Make
every attempt to complete all sections and parts. Include your name at the top of this file and
complete the section to certify, describe and sign your work as your own. When complete, save
and submit in JetNet. Problem #1 - PPE Matching
Directions: Match the following description of PPE cost items with the appropriate PPE accounts:
L
B
LI
O Account Land
Buildings
Land Improvements
Other Assets Cost description 1 Interest cost incurred during building construction. 2 Back taxes on purchased plot of land to be used for building site. 3 Assessment by city for drainage system. 4 Landscaping shrubs planted after building has been constructed. 5 Demolition costs of building on land bought for plant site. 6 Interest cost incurred after completion of building construction. 7 Architect's fees. 8 Grading and filling building site. 9 Parking lots. 10 Building permits. Problem #2 - PPE Acquisition
Directions: Determine the proper balances @ 12/31/17 for the Land and Building accounts.
Background: Monkey Manufacturing Inc. incorporated on 1/1/17 but was unable to begin manufacturing
activities until 8/1/17 because the new factory facilities were not completed until that date. Costs related to the
purchase of the Land and Building construction include: 1/31/2017 Purchased land and dilapidated building (paid $100,000 cash and issued 1,000 shares of stock with
a par value of $100 per share at an active trading market value per share of $150 per share) 2/28/2017 Paid to remove building (paid Kwik Demolition Co. $6000, but received $1000 from the sale of
salvaged material) 4/1/2017 Paid legal fees (includes $2000 to examine the title covering the land purchase and $1000 for legal
work in connection with the building construction) 5/1/2017 Paid fire insurance premium of $4000 for construction related coverage 5/10/2017 Paid city special tax assessment for street improvements of $8000 6/1/2017 Made first construction payment of the new building at $500,000 8/1/2017 Made final payment on building construction of $500,000 8/31/2017 Allocation of the plant supervisor’s salary related to the construction project, $20,000 12/31/2017 Asset write-up (due to rising land costs, the company president is sure that the land is worth at
least $100,000 more than the original cost to the company). LAND BUILDING Problem #3 - Journal entries for exchange of fixed assets
Part 1: Assume that the following cases are independent and rely on the following data. Jackson Co. and Lansing
Co. traded equipment on 7/1/2017. The exchange has commercial substance. Prepare journal entries to record
this exchange for both companies.
EXCHANGE
INFORMATION
FOR BOTH
COMPANIES: Equipment (cost)
Accumulated depreciation
Fair value of equipment Jackson:
###
$ 500,000
### Lansing:
###
###
### Exchange journal entry for Jackson Inc:
Date
7/1/2017 Description
Equipment
Accumulated Depreciation
Equipment
Gain in Disposals Debit Credit ###
$ 500,000
###
$ 100,000 $ 2,100,000 $ 2,100,000
Exchange journal entry for Lansing Inc:
Date
7/1/2017 Description
Equipment
Accumulated Depreciation
Equipment
Gain on Disposal Debit Credit ###
###
###
$ 200,000 $ 3,200,000 $ 3,200,000 Part 2: Assume that the following cases are independent and rely on the following data. Jackson Co. and Lansing
Co. traded equipment on 12/1/2017. The exchange lacks commercial substance. Prepare journal entries to
record this exchange for both companies.
EXCHANGE
INFORMATION
FOR BOTH
COMPANIES: Equipment (cost)
Accumulated depreciation
Fair value of equipment
Cash received (paid) Jackson:
Lansing:
###
###
$ 500,000
###
###
###
$ (300,000) $ 300,000 Exchange journal entry for Jackson Inc:
Date Description
Equipement
Accumulated Depreciation
Loss on Disposal
Cash
Equipment Debit Credit ###
$ 500,000
$ 200,000
$ 300,000
### $ 2,300,000 $ 2,300,000
Exchange journal entry for Lansing Inc:
Date Description
Equipment
Accumulated Depreciation
Cash
Equipment
Gain on disposal Debit Credit ###
###
$ 300,000
###
$ 500,000 Problem #4 - Depreciation calculations
A high-speed multiple-bit diamond drill press costing $1,300,000 has an estimated salvage value of $100,000 and a
life of ten years. This asset was purchased on November 1st, 2017. Lifetime output is estimated at 200,000 units;
the press produced 25,000 units in year one and 20,000 in year two. What is the annual depreciation for each of
the first two years under the following depreciation methods? (Show all calculations.) Method:
Straight
line
method Sum-ofthe-years
digits
method 2017 Depreciation Expense:
(1,300,000-100,000)/(10*12/2)
20000 (1300000-100000)*(10/55)
$
36,363.64 2018 Depreciation Expense:
Straight Line does not change
20000 (1300000-100000)*(9/55)
$
32,727.27 (1300000-100000)*(10/55)*(10/12)
$
181,818.18 Units of
production
(working
hours)
method ((1300000-100000)*25000)/200000 Double
declining
balance
method 3% Double Declining
$
36,000.00 150000 ((1300000-100000)*20000)/200000
120000 $ 1164000
34,920.00 Problem #5 - Depletion case
Rock and Roll Company purchased a rock quarry for $10,000,000 estimated to contain 2 million tons of commercial
rock material. When the quarry is completely depleted, it was expected that the land would be worth $100,000. A
building was constructed on the site for $250,000, which will have no salvage value when the quarry is depleted.
During the Year 1, 800,000 tons of material is removed, and $350,000 was spent for labor and other operating costs.
You will need to determine a reasonable manner for allocating depreciation on the building. Then, do your best to
analyze and document the cost of ore per ton for the first year of operations. Show all supporting calculations. Directions: calculate depletion expense, depreciation expense and the cost per ton of ore mined for Year 1 Year 1
Depletion
Expense: (Cost - Salvage Value)* Tons of Material Exctracted/Estimateed Tons of Material
(10000000-100000)*800000/2000000
$ 3,960,000.00 Year 1
Depreciation
Expense: (250000-0)*800000/2000000
$
100,000.00 Year 1
cost of ore
per ton (Depletion Cost + Depreciation + Labor and other Cost) / Tons of Material Extracted
(3,960,000+100,000+350,000)/800,000
$
5.5125 Problem #6 - Goodwill case
Background: Valentine Company decided to expand further by purchasing Waxman Company. The balance sheet
of Waxman Company as of December 31, 2016 includes:
WAXMAN
BALANCE
SHEET: Cash
Receivables
Inventories
Plant assets, net $ 250,000
$ 750,000
$ 200,000
### Liabilities
Common stock
Retained earnings $ 350,000
###
### ### ### Valentine and Waxman agree to an appraisal, which indicates that the fair value of the inventory is $270,000 and
the fair value of the plant assets is $1625,000. The fair value of all receivable and payable accounts is equal to the
amounts reported on the balance sheet. The agreed purchase price was $3,500,000 set for 7/1/2017, and this
amount is paid in cash to the previous owners of Waxman Company. Part 1 Directions: Prepare the journal entry by Valentine to record the purchase of Waxman including the
determination of the amount of goodwill (if any) implied in the purchase price of $3,500,000. Date Description Debit Credit Part 2 Directions: Answer the following questions about Goodwill: (1) Under what circumstances is it appropriate
to record goodwill? (2) Is Goodwill amortized? (3) Can Goodwill be impaired? Problem #7 - Patent case
Background: In early January 2017, Power Source Corporation applied for a patent, incurring legal costs of $80,000. The
estimated usefulness of the patent is ten years.
In January 2019, Power Source incurred an additional $12,000 in legal fees for a successful defense of its patent.
At the beginning of 2020, based on new market research, Power Sources determines that the fair value of the patent is
$50,000. Record the impairment in 2020. No other developments occur and the patent is in use through its remaining life.
Directions: Compute amortization expense and carrying balance of the patent at the end of the year for all years of the life of
the Patent from 2017 through 2026 including t-account analysis for the Patent account. PATENT YEAR 2017
2018
2019
2020
2021
2022
2023
2024
2025
2026 AMORTIZATION
PATENT
EXPENSE
CARRYING VALUE Problem #8 - Essays on IFRS, on ACC 240 and about you
The issue of IFRS will now long standing and pervasive. Will IFRS ever really come to the US?
#1 Study and review the following article on IFRS. Summarize the main points from the article. What is the
author saying about IFRS as of December 2016?
http://www.journalofaccountancy.com/news/2016/dec/ifrs-faces-long-odds-in-us-201615633.html #2 Describe your opinion of IFRS. Do you believe IFRS will be 100% fully adopted in the US? When? How? #3 Describe how you believe IFRS will impact your career in accounting and your plan for adjusting to these
changes to the accounting profession. #4 Now, focusing on our ACC 240 class; describe the 3 to 5 most important things you learned about accounting
in ACC 240 this semester. #5 Describe the 3 to 5 things you learned about yourself this semester due to your work and participation with
ACC 240. What did you learn about your work ethic, commitment to college, self strategies for working with
online classes, etc.?

 

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