QUESTION 01

ShuLong Corporation purchased land adjacent to its plant to improve access for trucks making deliveries.
Expenditures incurred in purchasing the land were as follows: €91250; Broker’s fees €7500; Title search
and other fees €6250; Demolition of an old building on the property €7125; Grading €1500; Digging
foundation for the road €3750; Laying and paving Driveway €31250; Lighting €9375; Signs €1875

Instructions :
List the items and amounts that should be included in the Land account.

QUESTION 02

Harness Company purchased a truck for $55000. The company expected the truck to last 5 (five) years
or 125000 miles, with an estimated residual value of $5000 at the end of that time. During the second
year the truck was driven $33750 miles.

Instructions :
Compute the depreciation for the second year under each of the methods below and place your answers
in the blanks provided.
Units-of-activity $_________________
Double-declining-
balance $_________________

QUESTION 03

On January 1, 2014, Hayes Company purchased a computer system for $45750. The system had an
estimated useful life of 7 years and no residual value. At January 1, 2016, the company revised the
remaining useful life to 2 years.

Question :
What amount of depreciation will be recorded for 2016 and 2017?

QUESTION 04

Rodney Enterprises sold equipment on January 1, 2017 for £6250. The equipment had cost £41250. The
balance in Accumulated Depreciation at January 1 is £37500.

Question :
What entry would Rodney make to record the sale of the equipment?
QUESTION 05

There are several records made in the book.

a. The $75 cost of repairing a printer was charged to Equipment.
b. The $6250 cost of a major engine overhaul was debited to Maintenance and Repairs Expense. The
overhaul is expected to increase the operating efficiency of the equipment.
c. The $7500 closing costs associated with the acquisition of land were debited to Legal Expense.
d. A $625 charge for transportation expenses on new equipment purchased was debited to Freight-In.

Instructions :
For each entry above, make a correcting entry if necessary. If the entry given is correct, then state "No
entry required."

QUESTION 06

Zang Company purchased a machine at a cost of ¥2700000. The machine is expected to have a ¥150000
residual value at the end of its 6-year useful life.

Instructions :
Compute annual depreciation for the first and second years using the :
(a) straight-line method, and
(b) double-declining-balance method.

QUESTION 07
QUESTION 08

QUESTION 09

QUESTION 10
QUESTION 11

On July 1, 2017, Kadarsh Inc. invested $900000 in a mine estimated to have 1000000 tons of ore of
uniform grade. During the last 6 months of 2017, 125000 tons of ore were mined and sold.

Instructions :
(a) Prepare the journal entry to record depletion.
(b) Assume that the 125000 tons of ore were mined, but only 106250 units were sold. How are the
costs applicable to the 18750 unsold units reported?

QUESTION 12

Ohio Mining Company purchased a mine for $81250000 which is estimated to have 312500 tons of ore
and a residual value of $12500000.

Questions :
(a) In the first year, 62500 tons of ore are extracted and sold.
Prepare the journal entry to record depletion for the first year.
(b) In the second year, 187500 tons of ore are extracted but only 156250 tons are sold.
Prepare the journal entry to record depletion for the second year.
(c) What amount and in what account are the tons of ore not sold reported?

QUESTION 13

(a) A company purchased a patent on January 1, 2017, for ¥3125000. The patent's legal life is 25 years
but the company estimates that the patent's useful life will only be 7 years from the date of
acquisition. On June 30, 2017, the company paid legal costs of ¥168750 in successfully defending
the patent in an infringement suit.
Prepare the journal entry to amortize the patent at year end on December 31, 2017.

(b) Spudec Company purchased a franchise from Yummee Food Company for $500000 on January 1,
2017. The franchise is for an indefinite time period and gives Spudec Company the exclusive rights
to sell Yummee Wings in a particular territory.
Prepare the journal entry to record the acquisition of the franchise and any necessary adjusting
entry at year end on December 31, 2017.
(c) Pulse Company incurred research costs of $625000 in 2017 in developing a new product.
Prepare the necessary journal entries during 2017 to record these events and any adjustments at
year end on December 31, 2017.

QUESTION 14
Presented below is information related to plant assets, natural resources, and intangibles at year end on
December 31, 2017, for Ranger Company:

Buildings $ 1.600.000
Goodwill $ 437.500
Patents $ 575.000
Coal Mine $ 550.000
Accumulated
Depreciation $ 775.000
Accumulated Depletion $ 343.750

Instructions :
Prepare a partial statement of financial position for Ranger Company that shows how the above listed items
would be presented.

QUESTION 15

Presented below are two independent situations:

(a) Waner Company exchanged an old machine (cost $125000 less $75000 accumulated depreciation)
plus $6250 cash for a new machine. The old machine had a fair value of $45000.
Prepare the entry to record the exchange of assets by Waner Company.

(b) Crumber Company trades old equipment (cost $112500 less $67500 accumulated depreciation) for
new equipment. Crumber paid $45000 cash in the trade. The old equipment that was traded had a
fair value of $55000.
Prepare the entry to record the exchange of assets by Crumber Company. The transaction has
commercial substance.