Question
During the current year, Rothchild, Inc., purchased two assets that are described as follows: Heavy Equipment Purchase price, $275,000. Expected to be used for 10
During the current year, Rothchild, Inc., purchased two assets that are described as follows: |
Heavy Equipment |
Purchase price, $275,000. |
Expected to be used for 10 years, with a residual value at the end of that time of $50,000. |
Expenditures required to recondition the equipment and prepare it for use, $75,000. |
Patent |
Purchase price, $75,000. |
Expected to be used for five years, with no value at the end of that time. |
Rothchild depreciates heavy equipment by the declining-balance method at 150 percent of the straight-line rate. It amortizes intangible assets by the straight-line method. At the end of two years, because of changes in Rothchilds core business, it sold the patent to a competitor for $30,000. |
Instructions |
a. | Compute the amount of depreciation expense on the heavy equipment for each of the first three years of the assets life. (Round your answers to the nearest dollar amount.) |
b. | Compute the amount of amortization on the patent for each of the two years it was owned by Rothchild. |
c-1. | Prepare the plant and intangible assets section of Rothchilds balance sheet at the end of the first and second years. (Amounts to be deducted should be indicated by a minus sign.) |
c-2. | Calculate the amount of the gain or loss on the patent that would be included in the second years income statement. |
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