CP9-3 Analyzing and Recording Long-Lived Asset Transactions with Partial-Year De
ID: 2518786 • Letter: C
Question
CP9-3 Analyzing and Recording Long-Lived Asset Transactions with Partial-Year Depreciation [LO 9-2, LO 9-3, LO 9-6]
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Palmer Cook Productions manages and operates two rock bands. The company entered into the following transactions during a recent year.
Purchased a tour bus for $94,000 by paying $33,000 cash and signing a $61,000 note due in two years.
The bus was painted with the logos of the two bands at a cost of $300, on account.
Purchased new speakers and amplifiers and wrote a check for the full $31,500 cost.
Paid $33,000 cash and signed a $255,000 five-year note to purchase a small office building and land. An appraisal indicated that the building and land contributed equally to the total price.
Paid $92,000 cash to acquire the goodwill and certain tangible assets of Kris’ Myth, Inc. The fair values of the tangible assets acquired were $22,000 for band equipment and $62,000 for recording equipment.
References
Section BreakCP9-3 Analyzing and Recording Long-Lived Asset Transactions with Partial-Year Depreciation [LO 9-2, LO 9-3, LO 9-6]
6.
value:
1.81 points
Required information
CP9-3 Part 1a
Complete the table below, indicating the account, amount, and direction of the effect (+ for increase and ? for decrease) for the above transactions. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)
TIP: Goodwill is recorded as the excess of the purchase price over the fair value of individual assets.
References
Accounting EquationDifficulty: 3 HardLearning Objective: 09-06 Analyze the acquisition, use, and disposal of long-lived intangible assets.
CP9-3 Part 1aLearning Objective: 09-03 Apply various depreciation methods as economic benefits are used up over time.
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7.
value:
1.81 points
Required information
CP9-3 Part 1b to 3
Prepare the journal entries for each of the above transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
For the tangible and intangible assets acquired in the preceding transactions, determine the amount of depreciation and amortization that Palmer Cook Productions should report for the quarter ended March 31. For convenience, the equipment and vehicle are depreciated the same way, using the straight-line method with a useful life of five years and no residual value. The building is depreciated using the double-declining-balance method, with a 8-year useful life and residual value of $33,000. (Do not round intermediate calculations).
Prepare a journal entry to record the depreciation calculated in requirement 2. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Palmer Cook Productions manages and operates two rock bands. The company entered into the following transactions during a recent year.
Explanation / Answer
Ans 1 & 3
Ans 2.
Books of Palmer Cook Productions Date Particulars Dr($) Cr($) 02.01.2018 Plant, Property & Equipment Dr 94000 To Cash 33000 To Creditors for equipment 61000 (Being purchase of bus partly through cash and partly through credit) 08.01.2018 Plant, Property & Equipment Dr 300 To Creditors for equipment 300 (Being painting work done on bus) 30.01.2018 Creditors for equipment Dr 300 To Bank 300 (Being painting expenses incurred on 08.01.2018 paid by cheque) 01.02.2018 Plant, Property & Equipment Dr 31500 To Bank 31500 (Being new speakers and amplifiers purchased through cheque) 08.02.2018 Plant property & Equipment Dr 200 To Cash 200 (Being expenses incurred to tune up the bus) 01.03.2018 Plant, Property & Equipment Dr 288000 To Cash 33000 To Loan 255000 (Being office premises purchased partly for cash and partly on loan) 31.03.2018 Plant, Property & Equipment Dr 84000 Goodwill Dr 8000 To Cash 92000 (Being purchase of the assets of Kris Myth Inc for cash) 31.03.2018 Depreciation on Plant property & Equipment Dr 14271 To Accumulated Depreciation 14271 (Being depreciation charged on assets)