Question

Required information [The following information applies to the questions displayed below.) During the current year ending on December 31, BSP Company completed the following transactions: a. On January 1, purchased a patent for $37,600 cash (estimated useful life, eight years). b. On January 1, purchased the assets (not detailed) of another business for $152,000 cash, including $11,000 for goodwill. The company assumed no liabilities. Goodwill has an indefinite life. c. On December 31, constructed a storage shed on land leased from D. Heald. The cost was $13,600. The company uses straight-line depreciation. The lease will expire in eight years. (Amounts spent to enhance leased property are capitalized as intangible assets called Leasehold Improvements.) d. Total expenditures for ordinary repairs and maintenance were $5,500 during the current year. e. On December 31 of the current year, sold Machine A for $7,400 cash. Original cost was $24,000; accumulated depreciation to December 31 of the prior year was $16,320 (on a straight-line basis with a $3,600 residual value and five- year useful life). Record the depreciation expense in transaction e(1) and the sale in transaction e(2). f. On December 31 of the current year, paid $5,200 for a complete reconditioning of Machine B acquired on January 1 of the prior year. Original cost, $48,600; accumulated depreciation to December 31 of the prior year was $2,300 (on a straight-line basis with a $7,200 residual value and 18-year useful life). equired: For each of these transactions, indicate the accounts, amounts, and effects (+ for increase and – for decrease) on the accounting quation.

Answer 1

Date: Stockholfo ability Je Jan . Patent Ca +37,600 - 31,600 Jan Asset Geodul cash +191,000 +11 -15 2002 13600 1.) 31 Dec. Leasehold imp. +13,600 outstanding payment for Leanbod (Expence) Swiphs Cash =5150D Surphy -4080 (Dep. En leth MachineA -40 60 (22) Cash + 7400 Surphy + 7400 (profit on sale of mach. A) Machine B +5,200 Cash -5,200 can complek e conditioning is done So amount is capitalised) Machine of -2300 ( Depreciation on machiB) (48600- 7200), 2300 Surphy -2300 (Dep. Exp.) 1%