BATAM Unit 2 Summative Task PART A-Transactions and Journal Entries 1. Mosbius Design Company purchased a computers for $75,000 in 2013. It is estimated those computers will have a $7,000 residual value at the end of their 5-year useful service life. The double declining balance method of amortization will be used. a.) Prepare an amortization schedule, which shows the annual amortization expense on the computer for its 5-year life. b.) Record the amortization expense for the year end of the first year (2013). 2. In 2018, Aldrin Company purchased equipment on January 1" for $60,000. It is estimated that the equipment will have a $5,000 residual value the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life. Answer the following independent questions I a. Prepare an amortization schedule, which shows the annual amortization expense on the equipment for its 5-year life. b. The company uses the units-of-activity amortization method. In year one, 16,000 units of product are produced and 24,000 units are produced in year two. Prepare the amortization schedule for the first two years. 3. Scherbatsky Company has the following transactions for the year. Record each transaction in the journal Jan 1 Acquired a copyright for $120,000 cash. The copyright has an expected useful life of 6 years. Jan. 30 Purchased land and a building for $380,000. The company paid $78,000 in cash and signed a mortgage payable with Eriksen Financial for the remainder. Fair market value of the land was 95,000 and 285,000 for the building. (Hint: basket purchase) Apr. 1 Sold office equipment for $6,000. The office equipment originally cost $15,000 and had a balance of $10,000 in the accumulated amortization account, as of Dec. 31". The amortization from Jan 1 to Mar. 31 is equal to $500. Oct. 1 Purchased equipment on account from The Stinson Corporation for $54,000. Dec. 31 Record the adjusting entries for the following capital assets purchased this year. Copyright on January 1" (needs to be calculated) Building on January 31" ($1,000) Equipment on October 1" ($5,400) 4. Puzzles Company has the following transactions related to intangible assets: Jan 2 Purchased a patent (7-year life) for $420,000 Jan 4 A 10-year franchise which expired on July 1, 2029 is purchased for $450,000. Apr 1 Goodwill purchased (indefinite life) for $360,000. Sept 1 Research costs of $185,000 are incurred. a.) Record the necessary entries to record these intangibles. All costs were incurred for cash. b.) Make the entries for the year end, December 31, 2019. Record any necessary amortization There was no impairment of goodwill. Intangible assets are amortized using the straight line method 5. Miyasawa Mining Company On Feb. 1, 2015, Miyasawa Mining Company purchased a mine for $80 million that is estimated have 250 000 tonnes of ore and a residual value of $3 million The cost of restoration at the end of the useful life is estimated at $8 million. In 2015, 30 000 tonnes of ore were extracted. a) Calculate the amount of amortization that should be recorded on December 31, 2015. b) Calculate the amount of the restoration liability. c) Show the journal entry for December 31, 2015. PART B - Short Answer Answer all questions in full sentences. 1. What factors must a company consider yhen choosing an amortization method to use for a fixed asset? Be sure to refer to GAAP and the effect of the decision on the financial statements. 2. Why do companies choose to accept credit and debit cards as forms of payment? Outline the pros and cons of this business decision. 3. Explain how the matching principle relates to uncollectible accounts receivable. How do companies satisfy the matching principle in this area of accounting? 4. Outline the reasons a company records a note receivable on its balance sheet. What benefits does a company get from issuing this promissory note? 5. What is the Capital Cost Allowance and how does it affect the amortization of assets