1. Determine depreciation for partial periods: Winston Company purchased a new m

Question

1. Determine depreciation for partial periods: Winston Company purchased a new machine on October 1, 2019, at a cost of $120,000. The company estimated that the machine will have a salvage value of $12,000. The machine is expected to be used for 12,000 working hours during its 4-year life. Instructions: Compute the depreciation expense under the following methods for the year indicated. ____________ a. Straight-line for 2019. b. ____________ Units-of-activity for 2019, assuming machine usage was 1,700 hrs. ____________ c. (Double) Declining-balance using double the straight- line rate for 2019 and 2020.

2. Prepare entries to set up appropriate accounts for different intangibles, amortize intangible assets. Lake Company, organized in 2019, has the following transactions related to intangible assets. 1/2/2019 Purchased patent (8 year life) $560,000 4/1/19 Goodwill purchased (indefinite life) 360,000 7/1/19 10-year franchise; expiration date 7/1/2029 440,000 9/1/19 Research and development costs 185,000 Instructions: Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the adjusting entries as of December 31, 2019, recording any necessary amortization and reflecting all balances accurately as of that date. Create a General Journal reflecting Debit and Credit columns.

Explanation / Answer

1.

1 Straight line depreciation = (Cost of asset - salvage value )/ Life of the asset Depreciation expense = (120000-12000) /4 27000 Depreciation expense 2019 27000*3/12 6,750 2020 27000*12/12 27,000 2 Double declining method Depreciation rate = [(cost of asset / life of asset ) / cost of asset ] *2 Depreciation rate = [120,000/4)/120,000] *2 Depreciation rate = 50% Depreciation = written down value * depreciation rate Depreciation expense 2019 Depreciation = 120,000 * 50%*3/12   15000 2020 Depreciation = (120000-15000) *50%   = 52500 3 Units of production method Depreciation per machine hour = (Cost of asset - salvage value )/ total machine hour Depreciation per machine hour = (120,000-12,000 )/12,000 Depreciation per item 9 Depreciation expense 2019 9*1700 15300

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