Accounting Week 4 Assignment 2

| September 28, 2018

Problem I
Nonmonetary Exchanges
Moore Corporation follows a policy
of a 10% depreciation charge per year on all Machinery and a 5% depreciation charge per year on buildings.
The following transactions occurred
in 2013:

March 31, 2013

Negotiations
which began in 2012 were completed and a building purchased 1/1/04
depreciation has been properly charged through December 31, 2012) at a cost
of $4,800,000 with a fair value of $3,000,000 was exchanged for a second
building which also had a fair value of $3,000,000.
The
exchange had no commercial substance. Both parcels of land on which the
buildings were located were equal in value, and had a fair value equal to
book value.

June 30, 2013

Machinery
with a cost of $480,000 and accumulated depreciation through January 1 of
$360,000 was exchanged with $300,000 cash for a parcel of land with a fair
value of $460,000.

Using the above information, you are
required to do the following:

Prepare all appropriate journal entries for Moore
Corporation for the above dates.

Problem II
Calculate Depreciation
A machine cost $800,000 on April 1,
2012. Its estimated salvage value is $80,000 and its expected life is eight
years.
Using the above information, you are
required to do the following:

Calculate the depreciation expense (to the nearest
dollar) by each of the following methods, showing the figures used.

Straight-line for 2012
Double-declining balance for 2013
Sum-of-the-years’-digits for 2013

Problem III
Impairment Journal Entries
Presented below is information
related to equipment owned by Finley Company at December 31, 2012.

Cost

$7,000,000

Accumulated depreciation to date

800,000

Fair value

3,400,000

Expected future net cash flows

5,000,000

Assume that Finley will continue to
use this asset in the future. As of December 31, 2012, the equipment has a
remaining useful life of 4 years.
Using the above information, you are
required to do the following:

Prepare the journal entry (if any) to record the
impairment of the asset on December 31, 2012.
Prepare the journal entry to record depreciation
expense for 2013.
The fair value of the equipment at December 31, 2013 is
$4,100,000. Prepare the journal entry (if any) necessary to record this
increase in fair value.

Support your responses with
examples.

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