Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator

P12-2 (Accounting for Patents) Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Fields patent number 758-6002-1A is as follows.

Date:    Activity:                Cost:
2005-2006    Research conducted to develop precipitator                $384,000
Jan. 2007    Design and construction of a prototype                87,600
March 2007    Testing of models                42,000
Jan. 2008    “Fees paid engineers and lawyers to prepare patent
application; patent granted June 30, 2009″                59,500

Nov. 2009    “Engineering activity necessary to advance the design
of the precipitator to the manufacturing stage”                81,500

Dec. 2010    “Legal fees paid to successfully defend precipitator
patent”                42,000

April 2011    “Research aimed at modifying the design of the
patented precipitator”                43,000

July 2015    “Legal fees paid in unsuccessful patent infringement
suit against a competitor”                34,000

Fields assumed a useful life of  17  years when it received the initial precipitator  patent. On January 1, 2013, it revised its useful life estimate downward to 5
remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company’s year ends December 31.

Instructions:   
(a) Compute the carrying value of patent No. 758-6002-1A on December 31, 2008.
(b) Compute the carrying value of patent No. 758-6002-1A on December 31, 2012.
(c) Compute the carrying value of patent No. 758-6002-1A on December 31, 2015.

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Rolanda Marshall Company, organized in 2013, has set up a single account

E12-6 (Recording and Amortization of Intangibles) Rolanda Marshall Company, organized in 2013, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2014.

01/02/2014    Purchased patent,        8    year life    $350,000
04/01/2014    Purchased goodwill, indefinite life                $360,000
07/01/2014    Purchased franchise with        10    year life,     $450,000
expiration date 7/1/24
08/01/2014    Payment of copyright,        5    year life    $156,000
09/01/2014    Research and development costs                $215,000
$1,531,000
Instructions:
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2014, recording any necessary amortization and reflecting all balances accurately as of that date. (Use straight-line amortization.)

Balance of Intangible Assets as of December 31, 2014

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John Hyde Inc. has the following amounts recorded in its general ledger

E12-3 (Classification Issues—Intangible Asset) John Hyde Inc. has the following amounts recorded in its general ledger at the end of the current year.

Organization costs                    $24,000
Trademarks                    $15,000
Discount on bonds payable                    $35,000
“Deposits with advertising agency for ads to promote goodwill
of company”                    $10,000

“Excess of cost over fair value of net identifiable assets of acquired
subsidiary”                    $75,000

“Cost of equipment acquired for research and development projects;
the equipment has an alternative future use”                    $90,000

“Costs of developing a secret formula for a product that is expected
to be marketed for at least 20 years”                    $80,000

Instructions: 
“(a) On the basis of the information above, compute the total amount to be reported by Hyde for
intangible assets on its balance sheet at year end. Equipment has alternative future
use.”

“(b) If an item is not to be included in intangible assets, explain its proper treatment for reporting
purposes.”

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On January 1, 2013, Locke Company, a small machine-tool manufacturer, acquired for $1,260,000

P11-12 (Depreciation—SL, DDB, SYD, Act., and MACRS) On January 1, 2013, Locke Company, a small machine-tool manufacturer, acquired for $1,260,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $60,000. Locke estimates that the new equipment can produce 12,000 machine tools in its first year. It estimates that production will decline by 1,000    units per year over the remaining useful life of the equipment.
The following depreciation methods may be used:
(1) Straight-line,
(2) Double-declining balance,
(3) Sum-of-years’-digits, and
(4) Units-of-output.
For tax purposes, the class life is 7 years. Use the MACRS tables for computing depreciation.

Instructions: 
“(a) Which depreciation method would maximize net income for financial statement reporting for the 3-year period ending December 31, 2015? Prepare a schedule showing the amount of accumulated depreciation at December 31, 2015, under the method selected. Ignore present value, income tax, and deferred income tax considerations.”

The straight-line method would provide the highest total net income for financial reporting over the three years, as it reports the lowest total depreciation expense. These computations are provided below.

“(b) Which depreciation method (MACRS or optional straight-line) would minimize net income for income tax reporting for the 3-year period ending December 31, 2015? Determine the amount of accumulated depreciation at December 31, 2015. Ignore present value considerations.”

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Alladin Company purchased Machine #201 on May 1, 2014

P11-1 (Depreciation for Partial Period—SL, SYD, and DDB) Alladin Company purchased Machine #201 on May 1, 2014. The following information relating to Machine #201 was gathered at the end of May.

Price                $85,000
Credit terms                2 / 10, N / 30
Freight-in costs                $800
Prep and installation costs                $3,800
Labor costs during regular production operations                $10,500

It was expected that the machine could be used for 10 years, after which the salvage value would be $0 Alladin intends to use the machine only 8 years, however after which it expects to be able to sell it for $1,500 The invoice for Machine #201 was paid    May 5, 2014. Alladin uses the calendar year as the basis for the preparation of financial statements.

Instructions:
“(a) (1) Compute the depreciation expense for the years indicated using the straight-line method for 2014.  (Round to the nearest dollar.)”

“(a) (2) Compute the depreciation expense for the years indicated using the sum-of-years’-digits method for 2015. (Round to the nearest dollar.) Utilize the Excel formula =SYD(Cost,Salvage,Life,Period).” (Round to the nearest dollar.)

“(a) (3) Compute the depreciation expense for the years indicated using the double-declining balance method for 2014. (Round to the nearest dollar.) Utilize the Excel formula =DDB(Cost,Salvage,Life,Period).”    (Round to the nearest dollar.)

“(b) Suppose Kate Crow, the president of Alladin, tells you that because the company is a new organization, she expects it will be several years before production and sales reach optimum levels. She asks you to recommend a depreciation method that will allocate less of the company’s depreciation expense to the early years and more to later years of the assets’ lives. What method
would you recommend?”

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Jon Seceda Corp. purchased machinery for $315,000

E11-4 (Depreciation Computations—Five Methods) Jon Seceda Corp. purchased machinery for    $315,000 on May 1, 2014. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and working hours of    25,000. During 2015, Seceda Corp. uses the machinery for 2,650     hours, and the machinery produces 25,500 units.

Instructions: 
From the information given, compute the depreciation charge for 2015 under each of the following methods. (Round to the nearest dollar.)

(a) Straight-line (Note – Utilize Excel formula =SLN(Cost,Salvage,Life) to solve the problem.)
Formula

“(b) Units-of-output (Note: Since units-of-production has an “”s”" in it, utilize salvage value in computing
period depreciation.)”

“(c) Working hours (Note: Working hours is a “”units-of-production”" method and since units-of-
production has an “”s”" in it, utilize salvage value in computing period depreciation.)”

“(d) Sum-of-years-digits (Note – Utilize Excel formula =SYD(Cost,Salvage,Life,Period) to solve the
problem.) (Note: Second year covers two depreciation periods.)”

“(e) Declining balance, (10 year life, DDB results in 20% annual rate, use 200% for Factor in Excel).
(Note: Utilize Excel formula =DDB(Cost,Salvage,Life,Period,Factor) to solve the problem.
(Note: Second year covers two depreciation periods.)”

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E11-2 Rembrandt Company acquired a plant asset

E11-2 (Depreciation—Conceptual Understanding) Rembrandt Company acquired a plant asset at the beginning of Year 1. The asset has an estimated service life of 5 years. An employee has prepared depreciation schedules for this asset using three different methods to compare the results of using one method with the results of using other methods. You are to assume that the following schedules have been correctly prepared for this asset using:

(1) the straight-line method,
(2) the sum-of-the-years’-digits method, and
(3) the double-declining-balance method.
Year    Straight-Line    Sum-of-Years’-Digits    Double-Declining-Balance

1    $9,000     $15,000     $20,000
2    9,000     12,000     12,000
3    9,000     9,000     7,200
4    9,000     6,000     4,320
5    9,000     3,000     1,480
Total    $45,000     $45,000     $45,000

Instructions:
Answer the following questions.
(a) What is the cost of the asset being depreciated?
(b) What amount, if any, was used in the depreciation calculations for the salvage value for this asset?
(c) Which method will produce the highest charge to income in Year 1?
(d) Which method will produce the highest charge to income in Year 4?
(e) Which method will produce the highest book value for the asset at the end of Year 3?
(f) If the asset is sold at the end of Year 3, which method would yield the highest gain (or lowest loss) on disposal of the asset?

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Lansbury Company purchases equipment on January 1, Year 1, at a cost of $518,000

E11-1 (Depreciation Computations—SL, SYD, DDB) Lansbury Company purchases equipment on January 1, Year 1, at a cost of    $518,000 . The asset is expected to have a service life of 12 years and a salvage value of $50,000

Instructions: 
“(a) Compute the amount of depreciation for each Years 1 through 3 using the straight-line
depreciation method.”

Straight-line method depreciation for each of Years 1 through 3 is computed as:

“(b) Compute the amount of depreciation for each Years 1 through 3 using the sum-of-years digits
depreciation method.” 

“The sum of 1 through 12 = 1+2+3+4+5+6+7+8+9+10+11+12 =
1+12 + 2+11 + 3+10 + 4+9 + 5+8 + 6+7 =
(1+12) + (2+11) + (3+10) + (4+9) + (5+8) + (6+7) =
(13) + (13) + (13) + (13) + (13) + (13) =
13 X (12/2) =
13 X 6 = 78
the sum of the first year and the last year multiplied by one half of the total number of years.

Hint: Since “”Sum-of-Years-Digits”" title contains an “”S”", use salvage value to compute periodic
depreciation expense.”

(c) Compute the amount of depreciation for each Years 1 through 3 using the double-declining balance method. (In performing your calculations, round constant percentage to the nearest one-hundredth of a point and round answers to the nearest dollar.) 

Hint: Since “”Double-Declining Balance Method”" title does not contain an “”S”", do not use salvage value to compute periodic depreciation expense. However, ensure that book value does not violate salvage value.”

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ACC 349 Week 5 Individual Assignment Ch. 8, 9, and 11 (A+ Guaranteed)

Individual Assignment, Exercises E8-11, Exercises BE9-6 and BE9-8, Questions 2 and 11, Exercise E11-6

Learning Team Problems, Problem P8-2A, Problem P11-4A

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ACC 349 Week 4 Individual Assignment (E5-1, E5-9, E6-7 and E6-10)

Week 4 Individual Assignments – Ch. 5 & 6

Prepare written responses to the following assignments from Managerial Accounting: Tools for Business Decision Making:

· Ch. 5 – Exercises E5-1 and E5-9

· Ch. 6 – Exercises E6-7 and E6-10

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