Part I 1.Assume you are the chief accountant of Exxon Mobil. Describe to the Boa

Question

Part I

1.Assume you are the chief accountant of Exxon Mobil. Describe to the Board of Directors the accounting for natural resources, including their acquisition, and cost allocation (depletion). Use a real- world example to explain your answers.

2.Assume you are the chief accountant of Microsoft Corporation. Describe to the Board of Directors the accounting for intangible assets, including their acquisition and cost allocation (amortization). Use an example in your explanations.

3.On June 1, ABC Inc. purchased a patent for $75,000 with a useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year assuming ABC Inc. follows a calendar year.

4.On January 4, ABC Inc. purchased a music distributor's collection of lyrics and songs for $425,000. The copyrights are expected to last another 10 years. Prepare the journal entry to amortize the copyright at the end of the first year.

Part II

For each item listed below, enter a code letter in the blank space to indicate the usage allocation terminology for the item. Use the following codes for your answer:

A—Amortization P—Depletion

D—Depreciation N—None of these

____ 1. Goodwill ____ 7. Timberlands

____ 2. Land ____ 8. Franchises (indefinite life)

____ 3. Buildings ____ 9. Licenses (limited life)

____ 4. Patents ____ 10. Land Improvements

____ 5. Copyrights ____ 11. Oil Deposits

____ 6. Research and development costs ____ 12. Equipment

Explanation / Answer

Answer:

3.Patent

Amortization expense - Patent a/c          Dr. 4375

              To Patent                            4375

75000/10 = 7500 x 7/12 = 4375

4.Copyrights

Amortization expense - Copyright a/c          Dr. 42500     

                    To Copyright                                     42500

425000 / 10 = 42500

5.Part II - Tangible assets are depreciated;Intangible assets are amortized ; Natural resources are depleted

1. Goodwill - A

2. Land -N - Land only appreciates

3.Buildings - D

4.Patents - A

5.Copyrights - A

6.Research and development costs - A

7.Timberlands - P

8.Franchises (indefinite life) - N - Instead of amortization, indefinite-life assets are evaluated for impairment yearly.

9. Licenses (limited life) - A

10 .Land Improvements - D

11.Oil Deposits - P

12.Equipment - D

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.