ACC 557 Homework 3: Chapters 9 and 10

| November 9, 2018

Due
Week 6 and worth 70 points

Directions:
Answer the following questions on a separate Microsoft Word or Excel document.
Explain how you reached the answer or show your work if a mathematical
calculation is needed, or both. Submit your assignment using the assignment
link in Blackboard.

Exercises

E9-9.Presented
below are selected transactions at Ridge Company for 2015.

Jan. 1 Retired
a piece of machinery that was purchased on January 1, 2005. The machine cost
$62,000 on that date. It had a useful life of 10 years with no salvage value.
June 30 Sold a computer that was purchased on
January 1, 2012. The computer cost $45,000. It had a useful life of 5 years
with no salvage value. The computer was sold for $14,000.
Dec. 31 Discarded a delivery truck that was
purchased on January 1, 2011. The truck cost $33,000. It was depreciated based
on a 6-year useful life with a $3,000 salvage value.

Instructions
Prepare
Pryce Company’s journal entries to record the sale of the equipment in these
four independent situations.
a)
Sold
for $31,000 on January 1, 2015.
b)
Sold
for $31,000 on May 1, 2015.
c)
Sold
for $11,000 on January 1, 2015.
d)
Sold
for $11,000 on October 1, 2015.

E9-11.On
July 1, 2015, Friedman Inc. invested $720,000 in a mine estimated to have
900,000 tons of ore of uniform grade. During the last 6 months of 2015, 100,000
tons of ore were mined and sold.

Instructions
a)
Prepare
the journal entry to record depletion expense.
b)
Assume
that the 100,000 tons of ore were mined, but only 80,000 units were sold. How
are the costs applicable to the 20,000 unsold units reported?

E10-12.Whitmore
Company issued $500,000 of 5-year, 8% bonds at 97 on January 1, 2015. The bonds
pay interest twice a year.

Instructions
a)
(1)
Prepare the journal entry to record the issuance of the bonds.
(2)
Compute the total cost of borrowing for these bonds.
b)
Repeat
the requirements from part (a), assuming the bonds were issued at 105.

E10-15.Jernigan
Co. receives $300,000 when it issues a $300,000, 10%, mortgage note payable to
finance the construction of a building at December 31, 2015. The terms provide
for semiannual installment payments of $25,000 on June 30 and December 31.

Instructions
Prepare
the journal entries to record the mortgage loan and the first two installment
payments.

Problems

P9-7A.The
intangible assets section of Sappelt Company at December 31, 2015, is presented
below.
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The
patent was acquired in January 2015 and has a useful life of 10 years. The
franchise was acquired in January 2012 and also has a useful life of 10 years.
The following cash transactions may have affected intangible assets during
2016.
Jan. 2 Paid $27,000 legal costs to
successfully defend the patent against infringement by another company.
Jan.–June Developed a new product, incurring
$140,000 in research and development costs. A patent was granted for the
product on July 1. Its useful life is equal to its legal life.
Sept. 1 Paid $50,000 to an extremely large
defensive lineman to appear in commercials advertising the company’s products.
The commercials will air in September and October.
Oct. 1 Acquired a franchise for $140,000.
The franchise has a useful life of 50 years.

Instructions
a)
Prepare
journal entries to record the transactions above.
b)
Prepare
journal entries to record the 2016 amortization expense.
c)
Prepare
the intangible assets section of the balance sheet at December 31, 2016.

P10-1A.On
January 1, 2015, the ledger of Accardo Company contains the following liability
accounts.
Accounts
Payable $52,000
Sales
Taxes Payable 7,700
Unearned
Service Revenue 16,000

During
January, the following selected transactions occurred.
Jan. 5 Sold merchandise for cash totaling $20,520,
which includes 8% sales taxes.
12 Performed
services for customers who had made advance payments of $10,000. (Credit Service
Revenue.)
14 Paid state
revenue department for sales taxes collected in December 2014 ($7,700).
20 Sold 900 units of
a new product on credit at $50 per unit, plus 8% sales tax.
21 Borrowed $27,000
from Girard Bank on a 3-month, 8%, $27,000 note.
25 Sold merchandise
for cash totaling $12,420, which includes 8% sales taxes.

Instructions
a) Journalize the January transactions.
b) Journalize the adjusting entry at
January 31 for the outstanding note payable. (Hint: Use one-third of a month
for the Girard Bank note.)
c) Prepare the current liabilities
section of the balance sheet at January 31, 2015. Assume no change in accounts payable.

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