Brown Company paid cash to purchase the assets of Coffee Company on January 1, 2019. Information is as follows:

Total cash paid $2,990,000

Assets acquired:

Land $600,000

Building $600,000

Machinery $500,000

Patents $600,000

 

The building is depreciated using the double-declining balance method. Other information is:

Salvage value $60,000

Estimated useful life in years 30

 

The machinery is depreciated using the units-of-production method. Other information is:

Salvage value, percentage of cost 10%

Estimated total production output in units 400,000

Actual production in units was as follows:

2019: 40,000

2020: 80,000

2021: 120,000

 

The patents are amortized on a straight-line basis. They have no salvage value.

Estimated useful life of patents in years 20. On December 31, 2020, the value of the patents was estimated to be $900,000

 

Where applicable, the company uses the ½ year rule to calculate depreciation and amortization expense in the years of acquisition and disposal. Its fiscal year-end is December 31.

 

The machinery was traded on December 2, 2021 for new machinery. Other information is:

Fair value of old machinery $240,000

Trade-in allowance $336,000

List price for new machinery $504,000

Estimated useful life of new machinery in years 20

Estimated salvage value of new machinery $15,120

The new machinery if depreciated using the straight-line method and ½ year rule. On August 14, 2023, an addition was made. This amount was material. Other relevant information is as follows:

Amount of addition, paid in cash $100,000

Number of years of useful life from 2023 (original machinery and addition): 20

Salvage value, percentage of addition 10%

 

Required:

Prepare journal entries to record:

1 The purchase of the assets of Coffee.

2 Depreciation and amortization expense on the purchased assets for 2019.

3 The decline (if any) in value of the patents at December 31, 2020.

4 The trade-in of the old machinery and purchase of the new machinery.

5 Depreciation on the new machinery for 2021.

6 Cost of the addition to the machinery on August 14, 2023.

7 Depreciation on the new machinery for 2023.

Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies.

After making payment, solution is sent within 2 to 5 minutes on your Email ID. But it may take up to 1 hour in case of high load on server. Solution is available in Word or Excel format unless otherwise specified.

-----------------------------------------------------------------------------------------------------------------------------

If you question is slightly different from the given above, please contact us at info@myassignmentguru.com with your version of question.