Question
Data related to the acquisition of timber rights and intangible assets Long-term assets that are useful in the operations of a business, are not held
Data related to the acquisition of timber rights and intangible assets
Long-term assets that are useful in the operations of a business, are not held for sale, and are without physical qualities.
during the current year ended December 31 are as follows:
A. | Timber rights on a tract of land were purchased for $3,461,120 on February 22. The stand of timber is estimated at 5,408,000 board feet. During the current year, 1,028,300 board feet of timber were cut and sold. |
B. | On December 31, the company determined that $3,640,000 of goodwill An intangible asset that is created from such favorable factors as location, product quality, reputation, and managerial skill. was impaired. |
C. | Governmental and legal costs of $6,108,000 were incurred on April 3 in obtaining a patent Exclusive rights to produce and sell goods with one or more unique features. with an estimated economic life of 10 years. Amortization is to be for three-fourths of a year. |
Required:
1. | Determine the amount of the amortization, depletion, or impairment for the current year for each of the foregoing items. |
2. | Journalize the adjusting entries required to record the amortization, depletion, or impairment for each item. Refer to the Chart of Accounts for exact wording of account titles. |
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Starting questions
1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the items in the Instructions.
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Points:
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Explanation
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Chart of Accounts
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Journal
2. Journalize the transactions and the adjusting entries on December 31 . Refer to the Chart of Accounts for exact wording of account titles. Scroll down to access pages 2 through 3 of the journal.
a. Timber rights on a tract of land were purchased for $3,461,120 on February 22. The stand of timber is estimated at 5,408,000 board feet. During the current year, 1,028,300 board feet of timber were cut and sold.
PAGE 1
JOURNAL
ACCOUNTING EQUATION
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
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Solution
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
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Points:
b. On December 31, the company determined that $3,640,000 of goodwill
An intangible asset that is created from such favorable factors as location, product quality, reputation, and managerial skill.
was impaired.
PAGE 2
JOURNAL
ACCOUNTING EQUATION
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
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| Adjusting Entries |
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Solution
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
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Points:
c. Governmental and legal costs of $6,108,000 were incurred on April 3 in obtaining a patent
Exclusive rights to produce and sell goods with one or more unique features.
with an estimated economic life of 10 years. Amortization is to be for three-fourths of a year.
PAGE 3
JOURNAL
ACCOUNTING EQUATION
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
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1 |
| Adjusting Entries |
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