Willo Company recently negotiated a lump-sum purchase of several assets from a road equipment dealer who was planning to change locations. The purchase was completed on September 30, 1990, at a total cash price of \(\$ 870,000\), and included a garage with land and certain land improvements and a new heavy, generalpurpose truck. The estimated market value of each asset was: sales garage, \(\$ 552,750\); land, \(\$ 331,650\); land improvements, \(\$ 100,500\); and truck, \(\$ 20,100\).

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Required }
1. Prepare a schedule to allocate the lump-sum purchase price to the separate assets that were purchased. Also present the general journal entry to record the purchase.
2. Calculate the 1991 depreciation expense on the garage using the sum-of-theyears'-digits method and assuming a 15 -year life and a \(\$ 37,500\) salvage value.
3. Calculate the 1990 depreciation expense on the land improvements assuming an eight-year life and declining-balance depreciation at twice the straight-line rate.
4. The truck is in the five-year class for tax purposes but is expected to last six years and have a salvage value of \(\$ 2,250\). Prepare a schedule showing each year's depreciation on the truck for tax purposes, assuming

(a) five-year straight-line, and

(b) MACRS depreciation.
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Problem 9-7A \\ Intangible assets and \\ natural resources \\ (L.O. 7)
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