E10-3 On March 1, 2017, Westmorland Company acquired real estate on which it planned to construct a

small office building. The company paid $75,000 in cash. An old warehouse on the property was razed at
a cost of $8,600; the salvaged materials were sold for $1,700. Additional expenditures before
construction began included $1,100 attorney's fee for work concerning the land purchase, $5,000 real
estate broker's fee, $7,800 architect's fee, and $14,000 to put in driveways and a parking lot.
Instructions

(a) Determine the amount to be reported as the cost of the land.

(b) For each cost not used in part (a), indicate the account to be debited.

Solution:

a) 75000+8600-1700+5000+7800=88000

LAND 88000

CASH 88000

B) BUILDING 7800

LAND IMPROVEMENT 14000

Cash 21800

E10-5 Yellow Bus Lines uses the units-of-activity method in depreciating its buses. One bus was
purchased on January 1, 2017, at a cost of $148,000. Over its 4-year useful life, the bus is expected
to be driven 100,000 miles. Salvage value is expected to be $8,000.

Instructions

(a) Compute the depreciable cost per unit.

(b) Prepare a depreciation schedule assuming actual mileage was: 2017, 26,000; 2018, 32,000;
2019, 25,000; and 2020, 17,000.

a) 148000-8000 = 1.4$
100000
b) 2017= 1.4*26000= $36400
2018= 1.4*32000= $44800
2019= 1.4*25000= $35000
2020= 1.4*17000= $23800
36400+44800+35000+23800= $140000
 E10-7 Linton Company purchased a delivery truck for $34,000 on January 1, 2017. The truck has
an expected salvage value of $2,000 and is expected to be driven 100,000 miles over its
estimated useful life of 8 years. Actual miles driven were 15,000 in 2017 and 12,000 in 2018.

Instructions
(a) Compute depreciation expense for 2017 and 2018 using (1) the straight-line method, (2) the
units-of-activity method, and (3) the double-declining-balance method.
(b) Assume that Linton uses the straight-line method. (1) Prepare the journal entry to record
2017 depreciation. (2) Show how the truck would be reported in the December 31, 2017,
balance sheet.

Solution:
a) 1- depreciation expense 2017= 34000-2000 = $4000
8
Depreciation expense 2018= 34000-2000 =$4000
8
2- Depreciation cost per unit2017= 34000-2000= $0.32/mile
100000
Depreciation expense (2017)=15000*0.32= $4800
Depreciation expense ( 2018)= 12000*0.32= $3840
Accumulated Dep. Exp= 4800+3840=$8640

3) double declining method

Year B.V beg Dep Rate Annual dep exp Acc dep Book Value
2017 34000 25% 8500 8500 25500
2018 25500 25% 6375 14875 19125

B-1 Depreciation expense 4000

Accumulated depreciation-Equipment 4000

2-Asset

Property, plant and equipment

Equipment 34000

Less accumulated depreciation (4000) 30000

Reminder: Classified balance sheet

Asset Property, plant, equipment Liability & owner’s equity

Current asset land $$$ $$$ liabilities

Short term invest building ($$$ at cost) current liabilities

A/R less: Acc Dep. Equip. ($$$) $$$ A/P

Prepaid Equip. $$$ at cost short term N/P

Supply less: Acc Dep. Equip. ($$$) $$$ property tax payable

Inventory total current liabilities---

Total current asset total property plant & equipment $$$ long term liabilities

Long term investment intangible asset long term n/p

long term investment in stocks bonds payable

etc…… total long term liabilities-----

total long term investment Total asset total liabilities

E10.16 * (LO 6) Rizzo’s Delivery Company and Overland’s Express Delivery exchanged delivery trucks on
January 1, 2020. Rizzo’s truck cost $22,000. It has accumulated depreciation of $15,000 and a fair value
of $3,000. Overland’s truck cost $10,000. It has accumulated depreciation of $8,000 and a fair value of
$3,000. The transaction has commercial substance.

Instructions

a. Journalize the exchange for Rizzo’s Delivery Company.

b. Journalize the exchange for Overland’s Express Delivery

Disposal of BA: retirement, sale, exchange

Rizzos truck cost= $22000 overland truck cost= $10000

Acc. Depre. Rizzo truck= $15000 Acc Dep. Overland truck= 8000

Fair value=3000 Fair value=$3000

A) For rizzo company

Book value= cost – acc Dep, 22000-15000=7000

New truck(overland ) $3000

Acc dep. Rizzos truck $15000
Loss on disposal of PA $4000
Old truck rizzos truck $22000
b) For overland company
B.V= 10000-8000=2000$

New truck(rizzo truck) 3000

Acc Dep overland del 8000
Gain on disposal of NP 1000
New truck overland 10000
 E10-9 Presented below are selected transactions at Ridge Company for 2017. Jan. 1 Retired
a piece of machinery that was purchased on January 1, 2007. The machine cost $62,000 on
that date. It had a useful life of 10 years with no salvage value.
June 30, Sold a computer that was purchased on January 1, 2014. The computer cost
$45,000. It had a useful life of 5 years with no salvage value. The computer was sold for
$14,000.
Dec 31, Discarded a delivery truck that was purchased on January 1, 2013. The truck cost
$33,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.
Instructions:
Journalize all entries required on the above dates, including entries to update depreciation,
where applicable, on assets disposed of. Ridge Company uses straight-line depreciation.

Ans:
Dep exp=62000/10=6200
6200*10= $62000

Acc dep 62000

Equipment 62000

b- cost equipment=45000, UL=5years, the computer was bought januari1,2014

Dep Exp.=cost-sv/UL=45000-0/5=$9000/year

Dep exp. = 9000*3+6/12= $31500

Cash 14000

Acc Dep 31500

Equipmentl 54000

Gain on disposal 500

C- Dec 31

Dep Exp= 33000-3000/6=5000

Acc dep= 5000*5=25000

Cash 25000

Loss disposal 8000

equipment 33000
 E10.11 (LO 4) On July 1, 2020, Friedman Inc. invested $720,000 in a mine estimated to have 900,000
tons of ore of uniform grade. During the last 6 months of 2020, 100,000 tons of ore were mined.
Instructions
a. Prepare the journal entry to record depletion.

b. Assume that the 100,000 tons of ore were mined, but only 80,000 units were sold. How are the costs
applicable to the 20,000 unsold units reported?

ANS:

Cost of NR (natural resources)=720000

Total output=900000

In 2020, 100000 tons of ore were mined=total activity

Depletion cost per unit=720000-0/900000=.8 tons

Depletion expense =100000*0.8=$80000

Reminder: selling NR

Cash

Selles revenue

Cogs

Inventory

B) The 20000 units are recorded under inventory for 0.8*20000=16000

Sild items

Cogs (80000*.8)64000
inventory 64000
E10.12 The following are selected 2020 transactions of Pedigo Corporation.

Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.

May 1 Purchased for $75,000 a patent with an estimated useful life of 5 years and a legal life of 20
years.

Prepare necessary adjusting entries at December 31 to record amortization required by the events
above.

ANS: annual amortization expense= 75000/5=15000

annual amortization expense= 15000*8/12=10000

Amortization expense 10000

Patents 10000

E10.13 Gill Company, organized in 2020, has the following transactions related to intangible assets.
1/2/20    Purchased patent (7-year life) $595,000

4/1/20 Goodwill purchased (indefinite life) 360,000

7/1/20 10-year franchise; expiration date 7/1/2030 480,000

9/1/20 Research and development costs 185,000

Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the
adjusting entries as of December 31, 2020, recording any necessary amortization and reflecting all
balances accurately as of that date.

2 jan

Patent 595000

Cash 595000

Annual amortization expense=595000/7=85000

Amortization exp 85000

Patent 85000

1 april

Goodwill 360000

Cash 360000
1 july

Franchise 480000

Cash 480000

Annual amortization exp= 480000/10=48000

=48000*6/12=24000

Amortization exp 24000

Franchise 24000

1 Sep

Research and development exp $ 185000

Cash $ 185000

Amortisation exp=$85000+$24000=$109000

Amortization exp 109000

Patent 85000

Franchise 24000
E12-3 Suzy Vopat has owned and operated a proprietorship for several years. On January 1, she
decides to terminate this business and become a partner in the firm of Vopat and Sigma. Vopat's
investment in the partnership consists of $12,000 in cash, and the following assets of the
proprietorship: accounts receivable $14,000 less allowance for doubtful accounts of $2,000, and
equipment $30,000 less accumulated depreciation of $4,000. It is agreed that the allowance for
doubtful accounts should be $3,000 for the partnership. The fair value of the equipment is $23,500.
Instructions Journalize Vopat's admission to the firm of Vopat and Sigma

Vopat cash $12000

AR 14000

Doubtful acc $2000

Equipment $30000, acc dep=$4000

For partnership of OFDA=$3000, FV of equipment=$23500

Cash $12000

AR $14000

FV $235000

Vopat capital $46500

Afda $3000

E12-2 K. Decker, S. Rosen, and E. Toso are forming a partnership. Decker is transferring $50,000 of
personal cash to the partnership. Rosen owns land worth $15,000 and a small building worth
$80,000, which she transfers to the partnership. Toso transfers to the partnership cash of $9,000,
accounts receivable of $32,000, and equipment worth $39,000. The partnership expects to collect
$29,000 of the accounts receivable. Instructions (a) Prepare the journal entries to record each of the
partners' investments. (b) What amount would be reported as total owners' equity immediately after
the investments?

Cash  ....................................................................... 50,000

                    Decker,Capital..................................................            50,000

 
          Land  ................................................................ 15,000

          Buildings............................................................ 80,000

                    Rosen,Capital.................................                                  95,000

          Cash  .........................................................               9,000

          Accounts Receivable....................................             32,000

          Equipment.....................................................             39,000

                    Allowance for Doubtf Accounts.............                                    3,000

                    Toso,Capital............................................                                  77,000

(b)     $50,000 + $95,000 + $77,000 = $222,000

E12-4 McGill and Smyth have capital balances on January 1 of $50,000 and $40,000, respectively.
The partnership income-sharing agreement provides for (1) annual salaries of $22,000 for McGill
and $13,000 for Smyth, (2) interest at 10% on beginning capital balances, and (3) remaining income
or loss to be shared 60% by McGill and 40% by Smyth. Instructions (a) Prepare a schedule showing
the distribution of net income, assuming net income is (1) $50,000 and (2) $36,000. (b) Journalize
the allocation of net income in each of the situations above.
 McGill Smyth total

Salary allowance.............................................   $22,000   $13,000   $35,000

Interest allowance      

        McGill ($50,000 X 10%)........................ 5,000      

        Smyth ($40,000 X 10%).........................   4,000    

                Total interest...................................                             9,000  

Total salaries and interest...............................    27,000 17,000  44,000 

Remaining income, $6,000      

($50,000 - $44,000)       

        McGill ($6,000 X 60%).......................... 3,600      

        Smyth ($6,000 X 40%)...........................   2,400    

                Total remainder...............................                                 6,000

Total division of net income........................... $30,600 $19,400 $50,000

2-

Salary allowance.............................................   ($22,000)   ($13,000   $35,000

Interest allowance........................................... (5,000  ) (4,000   9,000  

Total salaries and interest............................... (27,000 ) (17,000  44,000 

Remaining deficiency, ($8,000)      

($36,000 - $44,000)       

        McGill ($8,000 X 60%).......................... ( (4,800)     

        Smyth ($8,000 X 40%)...........................   ( (3,200)   

                Total remainder............................... (             )                   (8,000)

($13,800
Total division of net income........................... ($22,200) $36,000

2) a)

Income salary 50000

McGill 30600

Smyth 19400
2-b)

Income salary 36000

Mcgill 22200

Smyth 13800

E12-5 Coburn (beginning capital, $60,000) and Webb (beginning capital $90,000) are partners.
During 2017, the partnership earned net income of $80,000, and Coburn made drawings of
$18,000 while Webb made drawings of $24,000. Instructions
(a) Assume the partnership income-sharing agreement calls for income to be divided 45% to
Coburn and 55% to Webb. Prepare the journal entry to record the allocation of net income.
(b) Assume the partnership income-sharing agreement calls for income to be divided with a
salary of $30,000 to Coburn and $25,000 to Webb, with the remainder divided 45% to Coburn
and 55% to Webb. Prepare the journal entry to record the allocation of net income.
(c) Assume the partnership income-sharing agreement calls for income to be divided with a
salary of $40,000 to Coburn and $35,000 to Webb, interest of 10% on beginning capital, and the
remainder divided 50%–50%. Prepare the journal entry to record the allocation of net income.
(d) Compute the partners' ending capital balances under the assumption in part (c).

(a)      Income Summary...................................................................................            80,000

                    Coburn, Capital ($80,000 X

45%)...............................................                                  36,000

                    Webb, Capital ($80,000 X

55%).................................................                                  44,000

(b)     

 Income Summary...............................................       80,000

 Coburn, Capita  [$30,000 + ($25,000 X 45%)]                                 41,250

 Webb, Capit    [$25,000 + ($25,000 X 55%)]                                 38,750

 
(c)       Coburn Web total

salary 40000 35000 75000

interest(10% on beg cap) 6000 9000 15000

Total 46000 44000 90000

Remaining (net loss (5000) (5000) (10000)

50:50)

Total rem 41000 39000 80000

Remaining NL (80K-90K) =(10000)

Income summery 80000

Coburn cap 41000

Web cap 39000

(d)

Total capital= beg Cap+inv+NI-Drawings

TC Coburn =60K+41K-18K=83K

TC Web = 90K+39K-24K =105K

There is no investment
E12-11 K. Kolmer, C. Eidman, and C. Ryno share income on a 5:3:2 basis. They have capital
balances of $34,000, $26,000, and $21,000, respectively, when Don Jernigan is admitted to the
partnership. Instructions Prepare the journal entry to record the admission of Don Jernigan under
each of the following assumptions. (a) Purchase of 50% of Kolmer's equity for $19,000. (b)
Purchase of 50% of Eidman's equity for $12,000. (c) Purchase of 331/3% of Ryno's equity for
$9,000.

(a)      K. Kolmer, Capital ($34,000 X 50%)....................          17,000

     D. Jernigan, Capital...........................................                                  17,000

(b)      C. Eidman, Capital ($26,000 X 50%)..................         13,000

D. Jernigan, Capital................................................................               13,000

(c)      C. Ryno, Capital ($21,000 X 33 1/3%).............            7,000 

   D. Jernigan, Capital..................................                             7,000 

E12-12 S. Pagan and T. Tabor share income on a 6:4 basis. They have capital balances of
$100,000 and $60,000, respectively, when W. Wolford is admitted to the partnership. Instructions
Prepare the journal entry to record the admission of W. Wolford under each of the following
assumptions.

(a) Investment of $90,000 cash for a 30% ownership interest with bonuses to the existing partners.
(b) Investment of $50,000 cash for a 30% ownership interest with a bonus to the new partner.

Pagan Cap =100000(60%)

Tabor Cap= 60000(40%)

Total income=100000+60000+90000=250000

W.Walfrod Cap=250000*.3=75000

Bonus to existing partners=90000-75000=15000

Cash 90000

W.Walfrod Cap 75000

Pagan cap=15000*.6=9000

Tabor cap=15000*.4=6000
(b) Total 160000+50000=210000

Walfrod cap= 210000*.3=63000

Bonus for new partner=63000-50000=13000

Cash 50000

Pagan cap 7800

Tabor cap 5200

Walfrod cap 63000

E13-4 Osage Corporation issued 2,000 shares of stock. Instructions Prepare the entry for the
issuance under the following assumptions.
(a) The stock had a par value of $5 per share and was issued for a total of $52,000.
(b) The stock had a stated value of $5 per share and was issued for a total of $52,000.
(c) The stock had no par or stated value and was issued for a total of $52,000.
(d) The stock had a par value of $5 per share and was issued to attorneys for services during
incorporation valued at $52,000.
(e) The stock had a par value of $5 per share and was issued for land worth $52,000.
ANS
a) Cash 52000
Common stock (2000*5) 10000

PIC in excess of par 42000

b) No pic in exces of par

c) Cash 52000

Common stock 52000

Market price 52000/2000= 26

d) Any services like attorneys it will put on organization expense

Organization expense 52000

Common stock 10000

PIC – cs 42000

e) Land 52000

CS 10000

PIC-CS 42000

E13-5 Quay Co. had the following transactions during the current period.
Mar. 2 Issued 5,000 shares of $5 par value common stock to attorneys in payment of a bill
for $30,000 for services performed in helping the company to incorporate.

June 12 Issued 60,000 shares of $5 par value common stock for cash of $375,000.

July 11 Issued 1,000 shares of $100 par value preferred stock for cash at $110 per share.
Nov. 28 Purchased 2,000 shares of treasury stock for $80,000. Instructions Journalize the
transactions.

ANS

Mar 2

Organization exp 30000

CS 25000

PIC Cs 5000

June 12

Cash 375000

CS of excess par 300000

PIC in ecsess of par 75000

July 11

Cash 110000

CS for for exp 100000

PIC Cs on excess par 10000

Nov 28

Treasury stock 80000

Cash 80000