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During the 2012 annual accounting period Chu Corporation

comple
During the 2012 annual accounting period, Chu Corporation completed the following
transactions:a. On January 1, 2012, purchased a license for $7,200 cash (estimated useful life,
three years).b. On January 1, 2012, repaved the parking lot of the building leased from I.
Kumara. The cost was $7,800; the estimated useful life was five years with no residual value.
The company uses straight-line depreciation. The lease will expire in 10 years. (Amounts spent
to enhance leased property are capitalized as intangible assets called Leasehold
Improvements.)c. On July 1, 2012, purchased another business for $120,000 cash. The
transaction included $115,000 for assets and $24,000 for the liabilities assumed by Chu. The
remainder was goodwill with an indefinite life.d. On December 31, 2012, sold Machine A for
$5,000 cash. Original cost $21,500; accumulated depreciation (straight line) to December 31,
2011, $13,500 ($3,500 residual value and four-year life).e. Total expenditures during 2012 for
ordinary repairs and maintenance were $6,700.f. On December 31, 2012, paid $8,000 for a
complete reconditioning of Machine B acquired on January 1, 2009. Original cost $18,000;
accumulated depreciation (straight line) to December 31, 2011, $12,000 ($2,000 residual value
and four-year life).Required:1. For each of these transactions, indicate the accounts, amounts,
and effects (+ for increase and – for decrease) on the accounting equation. Use the following
structure:Date Assets = Liabilities + Stockholders’ Equity2. For each of these assets, compute
depreciation and amortization to be recorded at the end of the year on December 31, 2012.View
Solution:
During the 2012 annual accounting period Chu Corporation comple
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