Question

Brown Company paid cash to purchase the assets of Coffee Company on January 1, 2019. Information is as follows: Total cash paid $3,500,000 Assets acquired: Land S600.000 Building $600,000 Machinery 5900.000 Patents S500,000 The building is depreciated using the double-declining balance method. Other information is: Salvage value 550.000 Estimated useful life in years The machinery is depreciated using the units-of-production method. Other information is: Salvage value. percentage of oost 1096 Estimated total production output in 200.000 Actual production in units was as 2019 40.000 2020 BUDOU 2021 ZORODO The patents are amortized on a straight-line basis. They have no salvage value Estimated useful life of patents in 30 On December 31, 2020, the value of the patents was estimated to be $100.000 Where applicable, the company uses the year rule to calculate depreciation and amortization expense in the years of acquisition and disposal. Its fiscal year-end is December 31 The machinery was traded on December 2, 2021 for new machinery. Other information is: Fair value of old machinery $240,000 Trade-in allowance S288.000 List price for new machinery $403.200 Estimated useful life of new machinery in 20 Estimated salvage value of new 38,064 The new machinery is depreciated using the straight-line method and On August 14, 2023. an addition was made. This amount was material. Other relevant information is as follows: Amount of addition, paid in ansh $100,000 Number of years of useful life from 2023 (original machinery and addition): 30 Salvage value, percentage of addition 1096 Required: Prepare journal entries to record: 1. The purchase of the assets of Coffee 2 Depreciation and amortization expense on the purchased assets for 2019 3 The decline (if any) in value of the patents at December 31 4 The trade-in of the old machinery and purchase of the new 5 Depreciation on the new machinery for 2021. 6 Cost of the addition to the machinery on August 14. 2023 7 Depreciation on the new machinery for 2023

Answer 1

The Journal entries has been done below and all the calculations are given in working notes after journal entries. Also single account for Depriciation and amortizarion is used to shortern the asnwer.

In the books if Brown Company
Journal Entries
SR. No.	Date	Particulars	Debit $	Credit $
1	Jan 1, 2019	Land A/C - Dr	600000
		Building A/C - Dr	500000
		Machinery A/C -Dr	900000
		Patent A/C - Dr	500000
		Goodwill A/C -Dr	1000000
		To Capital A/C		3500000
		(Being Assets of a coffee company purchased. Paid $1,000,000 extra which will be treated as goodwill)
2	Dec31,2019	Depriciation & Amortization A/C - Dr	173750
	(See WN-1)	To Building A/C		11250
		To Machinery A/C		162000
		(Being Assets Depriciated , See working note- 1 for calculations)
3	Dec31,2019	Loss on Patent Impairment A/C -Dr	400000
		To Patent		400000
		(Bening patent value reduced to $100000)
	Dec31,2019	Depriciation & Amortization A/C - Dr	3333
		To Patent A/C		3333
		(Being Patent Depriciated , See working note- 2 for calculations)
4	Dec31,2020	Depriciation & Amortization - Dr	257583
	(For understanding)	To Building A/C		11250
		To Machinery A/C		243000
		To Patent A/C		3333
		(Being Assets Depriciated , See working note- 1 for calculations)
5	Dec 2 ,2021	Depriciation & Amortization - Dr	81000
		To Machinery A/C		81000
		(Being Assets Depriciated , See working note- 3 for calculations)
	Dec 2 ,2021	Machinery A/C -Dr	403200
		Loss on Trade Off	10800
		To Machinery A/C		414000
		(Being old machinery traded off with a loss)
6	Dec31,2021	Depriciation & Amortization - Dr	24461
		To Building A/C		11250
		To Patent A/C		3333
		To Machinery A/C (See WN-4)		9878
		(Being assets depriciated)
7	Dec31,2022	Depriciation & Amortization - Dr	34340
		To Building A/C		11250
		To Patent A/C		3333
		To Machinery A/C (See WN-3)		19757
		(Being assets depriciated)
8	Aug 14, 2023	Machinery A/C -Dr	100000
		To Cash A/C		100000
		(Being machinery addition made)
9	Dec31,2023	Depriciation & Amortization - Dr	34340
		To Building A/C		11250
		To Patent A/C		3333
		To Machinery A/C (See WN-3)		19757
		(Being assets depriciated)
		Depriciation & Amortization - Dr	1500
		To Machinery A/C (Newly added part See WN-4)		1500

WN -1
Depriciation on Building =	(Cost - Salvage Value ) / Useful life
	(500000-50000) / 40
	11250
Depriciation on Machinery =	(No. of units produced / Total units life) x (Cost - Salvage Value)
2019=	(40000/200000) x (900000-90000)
	162000
2020=	(60000/200000) x (900000-90000)
	243000
2011=	(20000/200000) x (900000-90000)
	81000
WN-2
Amortization of Patent =	Fair Value / useful life
	100000/30
	3333 rounded off

WN- 3
Depriciation on new Machinery =	(Cost - Salvage Value ) / Useful life
	(403200-8064)/20
	19756.8
For 2021 since used less than half a year so half depriciation will be chagred	9878.4 or 9878 rounded

WN-4
Depriciation in Newly Added Machinery =	(Cost - Salvage Value ) / Useful life
	(100000-10000)/30
	3000
For 2023 since used less than half a year so half depriciation will be chagred	1500