1. Use the following information to answer the next (8) questions:

   Sparky Inc. is trading a machine which has and original cost of $60,000 and accumulated depreciation of $35,000 for another fixed asset. For each of the following independent scenarios, determine the amount to be capitalized for the new fixed asset that Sparky is acquiring (i.e. the original cost Sparky will report on their balance sheet for the new asset) and the gain or loss to be recognized at the time of the exchange.

   In all of the scenarios below, you are not given the Fair Market Value of the Old Machine. So, to calculate any potential gain or loss you have to compare the book value of the assets you gave up (including cash) to the fair value of the assets you received (including cash).

   *If there is a gain record your answer as a positive number; if there is a loss, record your answer in parenthesis (). If there is NO gain or loss, type in NE. Round all answers to the nearest whole dollar. Do not use punctuation marks (dollar signs or commas) in recording your answers.

   	New Asset's Original Cost Reported on Sparky's Balance Sheet	Gain/Loss Recognized by Sparky
   1. Sparkyreceived in this exchange a machine with a fair value of $18,000 and also received $10,000 cash.The exchangelackscommercial substance.	$___________	$__________
   2. Sparkypaid $8,000 and and traded the old asset to receive a machine with fair value of $40,000. The transaction hasno commercial substance.	$___________	$___________
   3. Sparkyreceived a machine with fair market value of $25,000 and $5,000 cash. The transactionlackscommercial substance.	$___________	$___________
   4. Sparkypaid $5,100 and exchanged the old asset. The fair value of the new asset received was $28,000.The exchangehascommercial substance.	$___________	$___________

   1. In Scenario #1, determine the original cost of the New Asset that Sparky will report on their balance sheet as a result of thistransaction.

QUESTION 2

1. For Scenario #1, determine the gain/loss Sparky will report as a result of this transaction:

QUESTION 3

1. ForScenario#2,determinetheoriginalcostoftheNewAssetthatSparkywillreportontheirBalanceSheetasaresultofthisexchange.

QUESTION 4

1. For Scenario #2 above, determine the gain/loss that Sparky will report as a result of this exchange. (*Note: If a gain is indicated, record your answer as a positive number; if a loss is indicated record your answer as a negative number using parenthesis ( ), if no gain or loss should be reported, record your answer as NE.)

QUESTION 5

1. ForScenario#3,determinetheoriginalcostoftheNewAssetthatSparkywillreportontheirBalanceSheetasaresultofthisexchange.

QUESTION 6

1. For Scenario #3, indicate the gain/loss Sparky will report as a result of this exchange.

QUESTION 7

1. ForScenario#4,determinetheoriginalcostoftheNewAssetthatSparkywillreportontheirbalancesheetasaresultofthisexchange.

QUESTION 8

1. For Scenario #4, determine the gain/loss that Sparky will report as a result of this exchange.

   (*Note: If a gain is indicated, record your answer as a positive number; if a loss is indicated record your answer as a negative number using parenthesis ( ), if no gain or loss should be reported, record your answer as NE.)

QUESTION 9

1. JJ Corporation purchased a machine on July 1, 2010 for $750,000. The machine was estimated to have a useful life of 10 years with a salvage value of $46,000 and uses the sum-of-years digits method to depreciate this class of equipment. During 2013, it became apparent that the machine would become uneconomical to operate after December 31, 2016, and that the machine would have no scrap value. What amount should be reported for Depreciation Expense as of December 31, 2013?

QUESTION 10

1. On March 1, 2010, Thomas Company acquired a machine for $3,000,000 and estimates a 10 year life, $150,000 salvage and uses the Double-Declining-Balance method for this class of asset.

   At the end of 2013 (after recording depreciation for the current year), Thomas determined it was necessary to evaluate this equipment for impairment.The company estimates this equipment will generate cash inflows of $400,000 per year and cash outflows of $150,000/year for each of the next four years. The company uses a 15% discount rate to evaluate operating assets.

   Determine the amount of any impairment loss to be recognized if Thomas plans to dispose of this asset. The present value of an ordinary annuity of 15% is 2.85498; present value of $1 is 0.57175; and future value of annuity is 4.99338.Thomas believes the present value is a good indicator of fair value in todays market.They also feel that a reasonable estimate for disposal costs is $13,745.

QUESTION 11

1. USE THE INFORMATION PRESENTED BELOW TO ANSWER THE NEXT (3) QUESTIONS:

   The intangible asset section of Eastman Company at December 31, 2012, is presented below:

   Patent A ($90,000 cost less $9,000 amortization)	$ 81,000
   Copyright ($48,000 cost less $19,200 amortization)	$ 28,800
   Total Intangibles	$109,800

   Patent A was acquired in January of 2012 and has a useful life of 10 years. When the copyright was purchased, it had a remaining legal life of 60 years, but Eastman projected it would generate revenues for only 10 years.

   The following transactions may have affected intangible assetsduring 2013:

   • June 30:Paid $29,750 legal costs to successfully defend Patent A against infringement.Eastman estimates the patents useful life remained unchanged from the date they placed it into service.
   • Jan-Aug:Developed a new product incurring $250,000 in research and development costs. Patent B was granted on September 1. Legal fees of $61,200 were incurred in filing for this patent. The company will amortize the cost of the patent over its legal life of 20 years.
   • Dec 31:At year end (after recording amortization for the current year), Eastman felt it was necessary to evaluate the copyright for impairment. Under current market conditions at Dec 31, 2013, the fair value of the copyright was determined to be $18,000.Eastman intends to continue to use the patent for at least three more years and estimates future net cash flows to be $7,000 per year.

   Determine total Amortization Expense to be reported on the Income Statement for the period ending December 31, 2013 for all intangibles:

QUESTION 12

1. Determine the impairment Loss, if any, on the copyright.

QUESTION 13

1. Determine the book value ofTotal Intangible Assets(net) that would appear on the December 31, 2013 balance sheet: