Palmer Cook Productions manages and operates two rock bands. The company entered into the following transactions during a recent year.
January 2 Purchased a tour bus for $80,000 by paying $20,000 cash and signing a
$60,000 note due in two years.
January 8 The bus was painted with the logos of the two bands at a cost of $350, on account.
January 30 Wrote a check for the amount owed on account for the work completed on
January 8.
February 1 Purchased new speakers and amplifiers and wrote a check for the full
$12,000 cost.
February 8 Paid $250 cash to tune up the tour bus.
March 1 Paid $20,000 cash and signed a $190,000 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.
March 31 Paid $90,000 cash to acquire the goodwill and certain tangible assets of Kris'
Myth, Inc. The fair values of the tangible assets acquired were: $20,000 for band equipment and $60,000 for recording equipment.
Required:
1. Analyze the accounting equation effects and record journal entries for each of the transactions.
2. 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 10-year useful life and residual value of $20,000.
3. Prepare a journal entry to record the depreciation calculated in requirement 3.
4. What advice would you offer the company in anticipation of switching to IFRS in the future?