Section A

QUESTION 1

Part A

Lump sum Buying

Lotus company purchased Building, Land and equipment for $600,000 . The accountant department is supposed to allocate the amount paid to the specific asset in accordance with IFRS. The table below provides the market value of similar assets on the market

Assets	Amount in $
Building	200,000
Land	125,000
Equipment	140,000

REQUIRED

Allocate the amount required to each asset.

Part B

Bruce Lee corporation purchased a truck which cost $57,540 and it has a six year useful life. The company believes that the truck will have a salvage value of $9000. The purchase was done on June 1, 2020. the company uses double declining to depreciate its assets.

Required

1. The asset is depreciated at a double declining method. Show the schedule of depreciation of this asset.

2. Journalize the depreciation expense in the first and fourth year

3. Give an extract of the balance sheet of year 2019.

Question 2

Briefly answer the following: [about 2-3 lines]

1. What is copyright? Explain what type of asset is it.

2. Explain depreciation. Why will a company use double declining depreciation ?

Question 3

IBM Ltd purchased a machine on April 31, 2015 for $ 85,000 cash.It had an estimated useful life of 8 years and a salvage value of $20000. On January 31, 2018 the machine was disposed of. The companys year-end is Dec 31 and the depreciation is done on a straight line method

Required:

• Make a schedule for the depreciation of the asset

• Prepare the entry to record the disposal under each of the following scenarios

• The machine was sold for $22,500 cash

• The machine was sold at its salvage value

• Using the schedule made in section 1 above journalize the depreciation in year 2015 and 2017.

• What is the Net Book Value in year 2016?

Section B

Question 1

Capital Asset Question

IBM Ltd purchased a machine on June 31,2017 for $95000 cash.It had an estimated useful life of 5 years and a salvage value of $20000.

The companys year-end is Dec 31 . The estmated total production units of the machine are 35000. The table below shows the annual production estimated

2015 9,500 units

2016 12,100 units

2017 10,000 units

2018 5,500 units

2019 4,200 units

Required

1. Prepare a schedule of depreciation using unit of production method

2. Journalize the depreciation expense of year 2018.

3. Give a balance sheet extract of the machine in year 2020

4. Prepare the entry to record the disposal under each of the following scenarios

• The machine was sold for $35800 cash

• The machine was sold at its salvage value