During the 2011 annual accounting period, Terwilliger Company completed the following transactions:
a. On January 1, 2011, purchased a patent for $21,000 cash (estimated useful life, seven years).
b. On January 1, 2011, purchased the assets (not detailed) of another business for cash $64,000, including $10,000 for goodwill. The company assumed no liabilities. Goodwill has an indefinite life.
c. On December 31, 2011, constructed a storage shed on land leased from S. Rhoades. The cost was $11,600. The company uses straight-line depreciation. The lease will expire in three years. (Amounts spent to enhance leased property are capitalized as intangible assets called Leasehold Improvements.)
d. Total expenditures during 2011 for ordinary repairs and maintenance were $5,500.
e. On December 31, 2011, sold Machine A for $7,000 cash. Original cost on January 1, 2010, was $25,000; accumulated depreciation (straight line) to December 31, 2010, $16,000 ($5,000 residual value and five-year useful life).
f. On December 31, 2011, paid $5,000 for a complete reconditioning of Machine B acquired on January 1, 2010. Original cost, $31,000; accumulated depreciation (straight line) to December 31, 2010, $9,600 ($7,000 residual value and 10-year useful life).
1. For each of these transactions, indicate the accounts, amounts, and effects (+ for increase and ? for decrease) on the accounting equation. Use the following structure:
Date Assets = Liabilities + Stockholders? Equity
2. For each of these assets except the assets not detailed in (b), compute depreciation and amortization to be recorded at the end of the year on December 31, 2011.
This question was answered on: Jul 11, 2017
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