See attached
1. Basket purchase allocation. Crow Co. purchased some of the machinery of Hare, Inc., a bankrupt competitor, at a liquidation sale for a total cost of $33,600. Crow's cost of moving and installing the machinery totaled $3,200. The following data are available: Hare's Net Book Value on the List Price of Appraiser's Estimate Item Date of Sale Same Item If New of Fair Value Punch press Lathe Welder $20,160 16,128 4,032 $3,600 18,000 6,000 $24,000 12,000 4,000 a. Calculate the amount that should be recorded by Crow Co. as the cost of each piece of equipment. b. Which of the following alternatives should be used as the depreciable life for Crow Co.'s depreciation calculation? Explain your answer. The remaining useful life to Hare, Inc. The life of a new machine The useful life of the asset to Crow Co. 2. Capitalizing versus expensing. For each of the following expenditures, indicate the type of account (asset or expense) in which the expenditure should be recorded. Explain your answers. a. $400 for repairing damage that resulted from the careless unloading of a new machine. b. $14,000 cost of designing and registering a trademark c. $2,800 in legal fees incurred to perform a title search for the acquisition of land d. $800 cost of patching a leak in the roof of a building e. $180,000 cost of salaries paid to the research and development staff 3. Depreciation calculation methods. Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $26,000 and has an estimated useful life of four years and an estimated salvage value of $4,000. a. Calculate depreciation expense for each year of the truck's life using 1. Straight-line depreciation 2. Double-declining-balance depreciation b. Calculate the truck's net book value at the end of its third year of use under each depreciation method. c. Assume that Kleener Co. had no more use for the truck after the end of the third year and that at the beginning of the fourth year it had an offer from a buyer who was willing to pay $6,200 for the truck. Should the depreciation method used by Kleener Co. affect the decision to sell the truck? 4/ Goodwill - effect on ROI and operating income. Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair market value. Suppose that Target Co. had operating income of $90,000 and net assets with a fair market value of $300,000. Takeover Co. pays $450,000 for Target Co.'s net assets and business activities. a. How much goodwill will result from this transaction? b. Calculate the ROI for Target Co. based on its present operating income and the fair market value of its net assets. c. Calculate the ROI that Takeover Co. will earn if the operating income of the acquired net assets continues to be $90,000. d. What reasons can you think of to explain why Takeover Co. is willing to pay $150,000 more than fair market value for the net assets acquired from Target Co.? 5/ Determine depreciation method used and date of asset acquisition: record disposal of asset. The balance sheets of HiROE, Inc., showed the following at December 31, 2011, and 2010: December 31, 2011 Machine, less accumulated depreciation of $283,500 at December 31, 2011, and $202,500 at December 31, 2010. $364,500 December 31, 2010 $445,500 a. If there have not been any purchases, sales, or other transaction affecting this equipment account since the equipment was first acquired, what is the amount of the depreciation expense for 2011? b. Assume the same facts as in part a. and assume that the estimated useful life of the equipment to HiROE, Inc., is eight years and that there is no estimated salvage value. Determine: 1. What the original cost of the equipment was. 2. What depreciation method is apparently being used. Explain your answer. 3. When the equipment was acquired. c. Assume that this equipment account represents the cost of 10 identical machines. Calculate the gain or loss on the sale of one of the machines on January 2, 2012, for $40,500. Use the horizontal model (or write the journal entry) to show the effect of the sale of the machine 6/ Present value calculations. Using a present value table, your calculator, or a computer program present value function, answer the following questions: a. What is the present value of nine annual cash payments of $4,000, to be paid at the end of each year using an interest rate of 6%? b. What is the present value of $15,000 to be paid at the end of 20 years, using an interest rate of 18%? c. How much cash must be deposited in a savings account as a single amount in order to accumulate $300,000 at the end of 12 years, assuming that the account will earn 10% interest? d. How much cash must be deposited in a savings account (as a single amount) in order to accumulate $50,000 at the end of seven years, assuming that the account will earn 12% interest? e. Assume that a machine was purchased for $60,000. Cash of $20,000 was paid, and a four-year, 8% note payable was signed for the balance. 1. Use the horizontal model, or write the journal entry, to show the purchase of the machine as described. 2. How much is the equal annual payment of principal and interest due at the end of each year? Round your answer to the nearest $1. 3. What is the total amount of interest expense that will be reported over the life of the note? Round your answer to the nearest $1. 4. Use the horizontal model, or write the journal entries, to show the equal annual payments of principal and interest due at the end of the year
