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Questions: QUESTION 1 Cost of Plant Assets Nike purchases a machine for $12,500, terms 2/10, n/60, FOB shipping point. Nike paid within the discount period
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QUESTION 1
Cost of Plant Assets
Nike purchases a machine for $12,500, terms 2/10, n/60, FOB shipping point. Nike paid within the discount period and took the $250 discount. Transportation costs of $360 were paid by Nike. The machine required mounting and power connections costing $895. Another $475 is paid to assemble the machine and $40 of materials are used to get it into operation. During installation, the machine was damaged and $180 worth of repairs were made.
Calculate the total cost to be recorded. (Show all your working/calculations)
QUESTION 2
Recording Costs of Assets
Reebok purchased land for $390,000 as part of its plans to build a new plant. The company pays $33,500 to tear down an old building on the lot the and $47,000 to fill and level the lot. It also pays construction costs of $1,452,200 for the new building and $87,800 for lighting and paving a parking area.
Prepare a single Journal entry to record these costs incurred by Reebok, all of which are paid in cash.
QUESTION 3
Lump Sum Purchase of Plant Assets
Adidas pays $395,380 for real estate with land, land improvements, and a building. Land is appraised at $157,040; land improvements are appraised at $58,890; and a building is appraised at $176,670.
1. Determine the total cost among the three assets. 2. Prepare the journal entry to record the purchase.
QUESTION 4
Depreciation
A machine costing $210,000 with a four-year life and an estimated $20,000 residual value is installed at Apples headquarters in California on January 1. The factory manager estimates the machine will produce 475,000 units of product during its life. It actually produces the following units: year 1, 121,400; year 2, 122,400; year 3, 119,600; and year 4, 118,200. The total number of units produced by the end of year 4 exceeds the original estimatethis difference was not predicted. (The machine must not be depreciated below its estimated residual value.)
Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method (Straight Line, Units of Production, Double Decline Balance). Provide all your working/calculations, and illustrate your results in a table.
QUESTION 5
Asset Exchange
Samsung owns a manufacturing machine that costs $38,400 with accumulated depreciation of $20,400. Samsung exchanges the machine for a newer model that has a market value of $48,000.
1. Provide the General Journal entries recording the exchange assuming Samsung paid $32,000 cash and the exchange has commercial substance. 2. Provide the General Journal entries recording the exchange assuming Samsung pays $24,000 cash and the exchange lacks commercial substance.
QUESTION 6
Recording a Note Payable through its Time to Maturity
During a recession many businesses borrow money to help increase business activity by financing inventory and accounts receivable. For example, Sony builds up its inventory to meet the needs of retailers selling the Playstation 5. A large portion of Sonys sales are on credit. As a result, Sony often collects cash from its sales several months after the transaction date. Assume on November 1, 2018, Sony borrowed $6 million cash from Chase Bank and signed a promissory note that matures in six months. The interest rate was 8.0 percent payable at maturity. The accounting period ends December 31.
Prepare the required journal entries to record the note on November 1, 2018, interest on the maturity date, April 30, 2019, assuming that interest has not been recorded since December 31, 2018.
QUESTION 7
Recording Bond Issuance and Interest
On January 1, Renewable Energy issues bonds that have a $20,000 par value, mature in eight years, and pay 12% interest semiannually on June 30 and December 31.
Prepare the journal entry for issuance assuming the bonds are issued at: (A) 99% and
(B) 10312 %
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