act 3391 traditional hw items no 37 40 43
I also included an attachment with the instructions.
37.
(2 points)
Acquiring a machine
.
a.
Geiger, a
publicly-traded
company, acquired a machine from Counter. Geiger gave Counter 10,000 shares of Geiger’s $1 par
value common stock in exchange for the machine. At the time of the aquisition, Geiger’s stock had a market value of $25 per
share. At the time of the acquisition, several appraisers valued the machine at $253,000. Prepare the entry Geiger should make
to record its acquisition of the machine.
b.
Tide, a
non-publicly-traded
company, acquired a machine from Roll. Tide gave Roll 10,000 shares of Tide’s $1 par value
common stock in exchange for the machine. At the time of the aquisition, Tide’s stock had a market value of $25 per share. At
the time of the acquisition, several appraisers valued the machine at $253,000. Prepare the entry Tide should make to record
its acquisition of the machine.
38.
(5 points) On 12-31-15, Acme purchased a machine. Acme signed a $800,000 zero-interest bearing note. The note is
payable in full on 12-31-17. Assume an acceptable interest rate on similar notes was 4%. On 12-31-15, Acme incurred and paid
$12,000 to have the machine installed in its sales office. In this problem, you can ignore depreciation – we’ll get to that in chapter 11.
Prepare the entries Acme should make related to this note on:
a.
12-31-15.
b.
12-31-16.
c.
12-31-17.
39.
(4 points) For each of the items below,
prepare the appropriate entry
.
1.
A motor in one of Excel’s trucks was overhauled at a cost of $4,000. Excel expects this overhaul will make the truck last longer,
i.e., the truck’s useful life will be extended.
2.
James, a maintenance worker at Excel, spent the entire week unloading and setting up a new machine in Excel’s factory. James’
earned $1,500 that week, however, James will not be paid until the following week. (Do not worry about any withholdings from
James’ pay.)
3.
Excel incurred and paid $1,600 for ordinary repairs on one of its machines.
4.
Excel incurred and paid $10,000 for adjustments to one of its machines. The adjustments will increase the efficiency of the
machine, i.e., the machine will be able to produce the same quantity of inventory items at a lower production cost.
2
40.
(9 points) B constructed a warehouse for its own use. B started construction on January 1 and completed construction on
December 31. Construction expenditures were as follows:
ï‚·
$350,000 on January 1
ï‚·
$420,000 on May 31
ï‚·
$250,000 on September 1
ï‚·
$140,000 on November 1
During the entire year B had the following outstanding notes payable:
ï‚·
A 5.00%, 5-year $8,000,000 note payable
ï‚·
A 4.50%, 7-year $4,000,000 note payable
ï‚·
A 3.00%, 4-year $5,000,000 note payable
a)
What were B’s total interest costs for the year?
b)
What amount of interest should B capitalize on this construction project?
c)
What was B’s interest expense for the year?
When necessary, round any interest rate as follows: 4.873% = 4.9% while 3.314% = 3.3%.
41.
(5 points) Leia Company purchased a machine for $10,000,000 on January 1, 2018. Leia estimates the machine will have
a five-year useful life, salvage value of $96,000, production capability of 800,000 units of a product called Hoosier, and 10,000
working hours. During 2018, Leia used the machine for 3,400 hours and the machine produced 275,000 units. Compute Leia’s
depreciation for 2018 assuming she uses the following depreciation methods:
a.
Straight-line
b.
Units-of-production
c.
Working hours
d.
Sum-of-the-years’ digits
e.
Double-declining balance
42.
(3 points) Evan Company purchased a machine for $500,000 on August 1, 2017. Evan estimates the machine will have a
ten-year useful life and a salvage value of $50,000. Evan calculates depreciation for a year to the nearest full month. Compute Evan’s
depreciation for 20
19
assuming he uses the following depreciation methods:
a.
Sum-of-the-years’ digits
b.
Double-declining balance
43.
(20 points) Diane’s balance sheets as of December 31, 2016 and 2017 are presented below:
2016
2017
Cash
$ 310,000
$ 443,456
Accounts receivable, net
300,000
430,000
Long-term notes receivable
0
100,000
Discount on long-term notes receivable
( 0)
( 17,356)
Property, plant, and equipment – at cost
750,000
950,000
Accumulated depreciation
( 325,000)
( 318,100)
TOTAL ASSETS
$1,035,000
$1,588,000
Accrued liabilities
$ 230,000
$ 175,000
Unearned revenues
220,000
310,000
Short-term debt
25,000
15,000
Common stock, $1 par value
60,000
110,000
Additional paid-in-capital
200,000
315,000
Retained earnings
300,000
663,000
TOTAL LIABILITIES & SE
$1,035,000
$1,588,000
Diane’s 2017 income statement is presented below:
Service revenues
$1,800,000
Other revenues and gains/losses, net
1,987
Selling, general, and administrative expenses
1,209,000
Interest expense
1,000
Income before income taxes
588,013
Income tax expense
125,013
Net income
$ 463,000
3
SELECTED
OTHER INFORMATION:
1.
On January 1, 2017, Diane provided services to a customer in exchange for a $100,000, zero interest bearing note
receivable. Diane will collect the note principal in full on January 1, 2020. The market rate of interest at the time of the sale
was 10%.
2.
During 2017, all other services provided by Diane were on a cash or short-term credit (AR) basis.
3.
During 2017, Diane declared and distributed a cash dividend.
4.
During 2017, Diane issued, in exchange for cash, 50,000 additional shares of her common stock.
5.
During 2017, Diane both bought and sold some PP&E. Diane uses the straight-line depreciation method on all of its PP&E
items and calculates depreciation to the nearest full-month. Diane assumes a $0 salvage value on each PP&E item. Diane’s
PP&E sales related to two items:
a.
A machine. Diane purchased the machine on 06-01-14 for $86,400. The machine had an eight-year useful life.
Diane sold the machine on 11-01-17 for $45,000.
b.
A building. When Diane purchased the building, she paid $100,000. Diane sold the building for $20,000. As a
result of the sale, Diane recorded a loss of $5,000.
6.
During 2017, Diane did NOT enter into any non-cash investing or financing activities.
Prepare Diane’s Statement of Cash Flows (in good form) for the year ended December 31, 2017. Diane uses the indirect method
