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Module 5 Assignment | LoudCloud Systems
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company’s objectives.
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P10-32a
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P10-32A Recording lump sum asset purchases, depreciation, and disposals
Gretta Chung Associates surveys American eating habits. The company’s accounts
include Land, Buildings, Office Equipment, and Communication Equipment, with
a separate Accumulated Depreciation account for each asset. During 2014, Gretta
Chung completed the following transactions:
Sep. 1 Gain $78,000
Jan.
1
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CHAPTER 10
Apr. 1
Sep. 1
Purchased office equipment, $119,000. Paid $80,000 cash and financed the
remaining with a note payable.
Acquired land and communication equipment in a lump-sum purchase. Total
cost was $270,000 paid in cash. An independent appraisal valued the land at
$212,625 and the communication equipment at $70,875.
Sold a building that cost $555,000 (accumulated depreciation of $255,000
through December 31 of the preceding year). Chung received $370,000 cash
from the sale of the building. Depreciation is computed on a straight-line basis.
The building has a 40-year useful life and a residual value of $75,000.
Recorded depreciation as follows:
Communication equipment is depreciated by the straight-line method over a
five-year life with zero residual value.
Office equipment is depreciated using the double-declining-balance method over
five years with a $2,000 residual value.
Dec. 31
Record the transactions in the journal of Gretta Chung Associates.
Learning Objective 4
Dep. Exp. $1,296,000
P10-33A Accounting for natural resources
McCabe Oil Company has an account titled Oil and Gas Properties. McCabe
paid $6,200,000 for oil reserves holding an estimated 500,000 barrels of oil.
Assume the company paid $510,000 for additional geological tests of the prop-
erty and $490,000 to prepare for drilling. During the first year, McCabe removed
and sold 90,000 barrels of oil. Record all of McCabe’s transactions, including
depletion for the first year.
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Module 5 Assignment | LoudCloud Systems
Grand Canyon University – Digital Resources
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a
P10-32a
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656 chapter 10
Learning Objective 5
P10-34A Accounting for intangibles
Midland Telecom provides communication services in Iowa, Nebraska, the
Dakotas, and Montana. Midland purchased goodwill as part of the acquisition
of Shipley Wireless Company, which had the following figures:
1. Goodwill $330,000
Book value of assets
Market value of assets
$ 750,000
1,000,000
530,000
Market value of liabilities
Requirements
1. Journalize the entry to record Midland’s purchase of Shipley Wireless for
$320,000 cash plus a $480,000 note payable.
2. What special asset does Midland’s acquisition of Shipley Wireless identify? How
should Midland Telecom account for this asset after acquiring Shipley Wireless?
Explain in detail.
CHAPTER 10
Learning Objectives 2, 3, 7
Appendix 10A
P10A-35A Journalizing partial year depreciation and asset disposals and
exchanges
During 2014, Mora Company completed the following transactions:
Jan. 1 Gain $2,000
Jan.
1
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Traded in old office equipment with book value of $40,000 (cost of $132,000
and accumulated depreciation of $92,000) for new equipment. Mora also paid
$80,000 in cash. Fair value of new equipment is $122,000. Assume the exchange
had commercial substance.
Sold equipment that cost $30,000 (accumulated depreciation of $25,000 through
December 31 of the preceding year). Mora received $2,000 cash from the sale of
Apr. 1
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