3 Marks Question 1 On September 5, 2017, Nelson Lumber purchased timber rights i
ID: 2410021 • Letter: 3
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3 Marks Question 1 On September 5, 2017, Nelson Lumber purchased timber rights in Northern Quebec for $432,000, paying $96,000 cash and the balance by issuing a non-current note. Logging the area is expected to take three years, and the timber rights will have no value after that time. On September 27, 2017, Nelson Lumber, purchased a patent $148,000 for new logging equipment on account. It is expected that the patent will be technologically obsolete in 10 years. Nelson's year-end is December 31 and it uses the straight-line method to the nearest month to amortize intangibles. 1. Record the acquisition of the timber rights and the patent. 2. Record amortization on the timber rights and the patent at December 31, 2017, and December 31, 2018. 3 Marks Question 2 West Coast Tours runs boat tours along the West Coast of British Columbia. On March 5, 2017, it purchased, with cash, a cruising boat for $828,000, having a useful life of 10 years or 13,250 hours, with a residual value of $192,000. The company's year-end is December 31. Calculate depreciation expense for the fiscal years 2017, 2018, and 2019 by completing a schedule with the following headings (round to the nearest whole dollar): 1. Depreclation Method Double Decllaing Balance Year Straight-Une Units-of Production2 Deprecietion is calculated to the naarast month 2Assume actual hours of service were 2017, 720; 2018, 1,780;2014 1,535 3 Marks Question 3 Vita Water purchased a used machine for $116,900 on January 2, 2017. It was repaired the next day at a cost of $4,788 and installed on a new platform that cost $1,512. The company predicted that the machine would be used for six years and would then have a $20,720 residual value. Depreciation was to be charged on a straight-line basis to the nearest whole month. A full year's depreciation was recorded on December 31, 2017. On September 30, 2022, it was retired. Prepare journal entries to record the purchase of the machine, the cost of repairing it, and the installation. Assume that cash was paid. Prepare entries to record depreciation on the machine on December 31, 2017 (its first year) and on September 30, 2022 in the year of its disposal (round calculations to the nearest whole dollar), when it is sold for $21,000. 1. 2.Explanation / Answer
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Under the double declining balance, depreciation is calculated at double the straight line rate of depreciation and the rate is applied to the net book value of the asset at the beginning of the year.
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Date Account Title Debit Credit Sept.5,2017 Timber Rights 432000 Cash 96000 Note Payable 336000 (Purchase of timber rights) Sept.27,2017 Patent 148000 Accounts Payable 148000 (Purchase of patent for logging equipment) Dec.31, 2017 Amortization expense 48000 Accumulated Depreciation - Timber rights 48000 (Amortization of timber rights for 2017) Dec.31, 2017 Amortization expense 3700 Accumulated Depreciation - Patent 3700 (Amortization of patent for 2017) Dec.31, 2018 Amortization expense 144000 Accumulated Depreciation - Timber rights 144000 (Amortization of timber rights for 2018) Dec.31, 2018 Amortization expense 14800 Accumulated Depreciation - Patent 14800 (Amortization of patent for 2018)Related Questions
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