Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 13.4P
a.
To determine
To prepare: The
b.
To determine
To prepare: The journal for recording depreciation and accretion accrual for each asset for first and second year.
c.
To determine
The carrying value of each asset and ARO at the end of the second year:
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2021, for $820,000 and immediately leased the building back. The operating lease is for the final 10 years of the building’s estimated 20-year remaining useful life. The building has a fair value of $820,000 and a book value of $660,000 (its original cost was $1 million). The rental payments of $120,000 are payable to the insurance company each December 31. The lease has an implicit rate of 8%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. & 2. Prepare the appropriate entries for National Distribution Center on January 1, 2021 and December 31, 2021, to record the sale-leaseback and necessary adjustments. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
A current asset (defender) is being evaluated for potential replacement. It was purchased four years ago at a cost of $62,000. It has been depreciated as a MACRS (GDS) five-year property-class asset. The present MV of the defender is $12,000. Its remaining useful life is estimated to be four years, but it will require additional repair work now (a one-time $4,000 expense) to provide continuing service equivalent to the challenger. The current effective income tax rate is 39%, and the after-tax MARR = 15% per year. Based on an outsider viewpoint, what is the after-tax initial investment in the defender if it is kept (not replaced now)?
To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2016, for $800,000 and immediately leased the building back. The operating lease is for the final 12 years of the building’s estimated 50-year useful life. The building has a fair value of $800,000 and a book value of $650,000 (its original cost was $1 million). The rental payments of $100,000 are payable to the insurance company each December 31. The lease has an implicit rate of 9%. Required: Prepare the appropriate entries for National Distribution Center on: 1. January 1, 2016, to record the sale-leaseback. 2. December 31, 2016, to record necessary adjustments.
Chapter 13 Solutions
Intermediate Accounting (2nd Edition)
Ch. 13 - Prob. 13.1QCh. 13 - Prob. 13.2QCh. 13 - Prob. 13.3QCh. 13 - Do sellers recognize sales taxes as expenses on...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Prob. 13.7QCh. 13 - What is a gam contingency? Is It accrued and...Ch. 13 - Do firms always accrue and record loss...Ch. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Prob. 13.13QCh. 13 - Prob. 13.14QCh. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.1MCCh. 13 - Prob. 13.2MCCh. 13 - Prob. 13.3MCCh. 13 - Medical Services Inc allows employees at the end...Ch. 13 - Trade Notes Payables. On February 1, Seville...Ch. 13 - Unearned Revenues. On June 1 of the current year,...Ch. 13 - Unearned Revenues. GoSnow Inc. provides snow...Ch. 13 - Prob. 13.4BECh. 13 - Prob. 13.5BECh. 13 - Prob. 13.6BECh. 13 - Sales Taxes Payable. Kloth Fabric Store operates...Ch. 13 - Prob. 13.8BECh. 13 - Prob. 13.9BECh. 13 - Prob. 13.10BECh. 13 - Asset Retirement Obligation at Acquisition. On...Ch. 13 - Prob. 13.12BECh. 13 - Asset Retirement Obligation, Disposal. Buckner...Ch. 13 - Prob. 13.14BECh. 13 - Prob. 13.15BECh. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - Warranty Liability, Assurance-Type Warranty,...Ch. 13 - Prob. 13.19BECh. 13 - Prob. 13.20BECh. 13 - Trade Notes Payable. On November 1, Barcelona...Ch. 13 - Unearned Revenues. On May 1 of the current year,...Ch. 13 - Gift Cards. Diamond Depot sold 57,000 of gift...Ch. 13 - Sales Taxes Payable. Eaton Technology operates...Ch. 13 - Prob. 13.5ECh. 13 - Asset Retirement Obligation. On January 1,...Ch. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Accounting for Premiums. Supergreen Grocers, Inc....Ch. 13 - Prob. 13.13ECh. 13 - Payroll Taxes Payable, Pay Exceeds. Wage Base....Ch. 13 - Current Operating Liabilities. James Stores, Inc....Ch. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Payroll Taxes Payable. Jackson Corporation employs...Ch. 13 - Prob. 1JCCh. 13 - Prob. 2JCCh. 13 - Prob. 3JCCh. 13 - Financial Statement Analysis Case You are...Ch. 13 - Surfing the Standards Case 1: Environmental...Ch. 13 - Prob. 2SSCCh. 13 - Prob. 1BCC
Knowledge Booster
Similar questions
- To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2021, for $990,000 and immediately leased the building back. The operating lease is for the final 10 years of the building's estimated 20- year remaining useful life. The building has a fair value of $990,000 and a book value of $745,000 (its original cost was $1 million). The rental payments of $290,000 are payable to the insurance company each December 31. The lease has an implicit rate of 9%. (FV of $1. PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. & 2. Prepare the appropriate entries for National Distribution Center on January 1, 2021 and December 31, 2021, to record the sale- leaseback and necessary adjustments. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet < 1 2 Record sale…arrow_forwardHow to calculate the Amortization Expense?arrow_forwardOriole Company purchases an oil tanker depot on January 1, 2025, at a cost of $657,400. Oriole expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. The company estimates the dismantle and removal will cost $73,610 at the end of the depot's useful life. (a) Prepare the journal entries to record the depot and asset retirement obligation for the depot on January 1, 2025. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2025, is $41,103. Use the Plant Assets account for the tanker depot. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.) (b) Account Titles and Explanation (To record the depot) (To record the asset retirement obligation) eTextbook and…arrow_forward
- On january 1, 2022, Sarah Company purchased a machine for 8,500,000 and received a government grant of 1,000,000 toward the asset cost. The accounting policy is to treat the grant as a reduction in the cost of the asset. The machine is to be depreciated on a straight line basis over 5 years with a residual value of 500,000. On january 1, 2024, the grant became fully repayable because of noncompliance with conditions. 1. What amount should be reported as depreciation for 2022? a. 1,700,000 b. 1,600,000 c. 1,500,000 d. 1,400,000 2. What amount should be reported as depreciation for 2024? a. 1,400,000 b. 1,800,000 c. 1,600,000 d. 2,000,000arrow_forwardOn March 1, 2024, a company entered into an agreement with the state to obtain the rights to operate a mineral mine for $6 million. The mine is expected to produce 155,000 tons of mineral. As part of the agreement, the company agrees to restore the land to its original condition after mining operations are completed in approximately five years. Management has provided the following possible outflows for the restoration costs that will occur five years from now: (PV of $1. PVA of $1) Cash Outflow $ 520,000 675,000 830,000 Probability 20% 30% 50% The company's credit-adjusted risk-free interest rate is 9%. During 2024, the company extracted 27,900 tons of ore from the mine. How much accretion expense will the company record in its income statement for the 2024 calendar year? Multiple Choicearrow_forwardBassinger Company purchases an oil tanker depot on January 1, 2022, at a cost of $600,000. Bassinger expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $70,000 to dismantle the depot and remove the tanks at the end of the depot’s useful life. a Prepare the journal entries to record the environmental liability for the depot on January 1, 2022. Based on an effective-interest rate of 6%, the fair value of the environmental liability on January 1, 2022, is $39,087. b Prepare any journal entries required for the environmental liability at December 31, 2022 and 2023. c On December 31, 2031, Bassinger pays a demolition firm to dismantle the depot and remove the tanks at a price of $65,000. Prepare the journal entry for the settlement of the environmental liability.arrow_forward
- Lifeline biofuels built an oil rig at a cost of $4.5 million. At the time that construction was complete, the company estimated the oil rig would have a useful life of 20 years (with no salvage value), after which Federal regulations would require that the oil rig be dismantled and the land area restored. The fair value of this asset retirement project was $830,000 and the present value of these asset retirement costs was $123,000 based on the 10% after-tax discount rate. At the end the the 20 year life, the company dismantles the oil rig and restores the land at a cost of $905,000. Following U.S. GAAP, the journal entry to record the completion of the resoration process would include: a: credit Loss on Settlemebnt of Asset Retirement Obligation for $782,00 b: debit Loss on Settlement of Asset Retirement Obligation for $75,000 c: credit Asset Retirement Obligation for $75,000 d: debit Loss on Settlement of Asset Retirement Obligation for $782,000 The answer is b but how is it…arrow_forwardTo raise operating funds, C Incorporated sold its office building to an insurance company on January 1, 2021, for $1,800,000 and immediately leased the building back. The operating lease is for the final 12 years of the building's estimated 20-year remaining useful life. The building has a fair value of $1,800,000 and a book value of $1,100,000 (its original cost was $3 million). The rental payments of $220,000 are payable to the insurance company each December 31. The lease has an implicit rate of 10%. Required: Round your answers to the nearest whole dollar amounts. Prepare the appropriate journal entries for C Incorporated on: 1. January 1, 2021, to record the sale-leaseback. 2. December 31, 2021, to record necessary adjustments.arrow_forwardTamarisk Corp. (TC) purchased a building in early January 2020, and classified the cost of the basic structure of $128,000 in an account called Buildings. TC accounts for this class of asset using the revaluation model, revalues the class every three years, and uses straight-line depreciation. The building structure is expected to have a useful life of 25 years with no residual value. TC has a December 31 fiscal year end. The asset's fair value at December 31, 2022, is $114,540. (a1) Calculate TC's depreciation for the first three years. TC's annual depreciation $ Save for Later 2020 2021 2022 Attempts: 0 of 1 used Submit Answerarrow_forward
- 1.On December 5, 2021, the company purchased new machinery from Nine Bhd for $45,000.The new machinery, like the rest of the company's machinery, will be depreciated at 15% per year using the declining balance technique on a yearly basis. The new machinery, on the other hand, is expected to have a residual worth of $5,000. On that date, the company received a $20,000 government subsidy for the purchase of new machinery and paid the remaining balance by check. The company's policy is to adopt the net-off approach for accounting for government grants. 2. On September 1, 2021, Fern Bhd purchased a retail building for $180,000 in order to demonstrate and advertise its products. The marketing department immediately put the shop building to use. A further $20,000 had been spent on a small repair of the shop building by Fern Bhd. On September 1, 2021, the renovation will commence. However, because to a covid-19 case involving two of the renovation workers, the work was halted for two weeks.…arrow_forwardOil Products Company purchases an oil tanker depot on January 1, 2020, at a cost of $600,000. Oil Products expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $75,000 to dismantle the depot and remove the tanks at the end of the depot’s useful life. Instructions a. Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2020. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2020, is $41,879. b. Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2020. Oil Products uses straight-line depreciation; the estimated salvage value for the depot is zero. c. On December 31, 2029, Oil Products pays a demolition firm to dismantle the depot and remove the tanks at a price of $80,000. Prepare the…arrow_forward(Asset Retirement Obligation) Oil Products Company purchases an oil tanker depot on January 1, 2017, at a cost of $600,000. Oil Products expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $75,000 to dismantle the depot and remove the tanks at the end of the depot’s useful life.Instructions(a) Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2017. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2017, is $41,879.(b) Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2017. Oil Products uses straight-line depreciation; the estimated salvage value for the depot is zero.(c) On December 31, 2026, Oil Products pays a demolition firm to dismantle the depot and remove the tanks at a price of…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
