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Complete the following exercises and problems in Excel:
P10-32A Recording lump sum asset purchases, depreciation, and disposals
Gretta Chung Associates surveys American eating habits. The company’s accounts include Land, Buildings, Office Equipment, and Communication Euipment, with a separate Accumulated Depreciation account for each asset. During 2014, Gretta Chung completed the following transactions: (Gain $78,000)
Jan. 1 Purchased office equipment, $119,000. Paid $80,000 cash and financed the remaining with a note payable.
Apr. 1 Acquired land and communication equipment in a lump-sum purchase. Total cost was $270,000 paid in cash. An independent appraisal valued the land at $212,625 and the communication equipment at $70,875.
Sep. 1 Sold a building that cost $555,000 (accumulated depreciation of $255,000 through December 31 of the preceding year). Chung received $370,000 cash from the sale of the building. Depreciation is computed on a straight-line basis. The building has a 40-year useful life and a residual value of $75,000.
Dec. 31 Recorded depreciation as follows:
Communication equipment is depreciated by the straight-line method over a five-year life with zero residual value.
Office equipment is depreciated using the double-declining-balance method over five years with a $2,000 residual value.
Record the transactions in the journal of Gretta Chung Associates.
P10-33A Accounting for natural resources
McCabe Oil Company has an account titled Oil and Gas Properties. McCabe paid $6,200,000 for oil reserves holding an estimated 500,000 barrels of oil. Assume the company paid $510,000 for additional geological tests of the property and $490,000 to prepare for drilling. During the first year, McCabe removed and sold 90,000 barrels of oil. Record all of McCabe’s transactions, including depletion for the first year. (Dep. Exp. $1,296,000)
P10-34A Accounting for intangibles
Midland Telecom provides communi ication services in Iowa, Nebraska, the Dakotas, and Montana. Midland purchased goodwill as part of the acquisition of Shipley Wireless Company, which had the following figures: (Goodwill $330,00)
Book value of assets $ 750,000
Market value of assets 1,000,000
Market value of liabilities 530,000
1. Journalize the entry to record Midland’s purchase of Shipley Wireless for $320,000 cash plus a $480,000 note payable.
2. What special asset does Midland’s acquisition of Shipley Wireless identify? How should Midland Telecom account for this asset after acquiring Shipley Wireless? Explain in detail.