348000 338302.

4
708000 768419.6
700000 237040.2
1,756,000.00 1343762
PROBLEM I
Purchase of land and old building
6,455,000
Fair value of Building is immaterial
Reservation fee of the property 155,000
Land survey 30,000
Special assessment of land 68,000
Legal fees to transfer title 35,000
INITIAL COST OF LAND 6,743,000 1

Initial costs incurred for the Building:

Demolition costs of the old building 124,000
Building permit fees 8,000
Temporary quarters built for construction crews 50,000
Excavation of basement for construction 57,000 239,000
Disbursements for the Construction:
1-Feb 1,000,000
1-Mar 300,000
30-Jun 500,000
1-Aug 500,000
1-Dec 600,000
31-Dec 100,000 3,000,000
Barrowing costs:
Specific Barrowing
(1,000,000 x 12%) 120000
General Barrowing
[*170/1800 X (1,675,000-1,000,000)] 63,750.00 183,750.00
INITIAL COST OF THE BUILDING 3,422,750 2

General Barrowings
Notes Payable (8% x 500,000) 40,000.00
Notes Payable (10% x 1,300,000) 130,000.00
*Total interest 170,000.00
Capitalizable barrowing cost from general (63,750.00)
Interest Expense 106,250.00 3

Building's depreciation
Cost of Building 3,422,750.00
Salvage Value (300,000.00)
Depreciable amount 3,122,750.00
Divide by: Useful life 25.00 124,910.00
Furniture and Fixture's depreciation
Cost 800,000.00
100%-Discount 95%
Net of Discount 760,000.00
Freight-in 10,000.00
Installation Cost 15,000.00
**Total Cost 785,000.00
Double Declining Balance Method (200%/8) 25%
Yearly depreciation 196,250.00
Number of months used (9/12) 0.75 147,187.50
Total Depreciation for 2018 272,097.50 4

**Furniture and Fixture initial cost 785,000.00

Depreciation expense for 2018 (147,187.50)
Carrying Value as of 2018 637,812.50
Depreciation expense for 2019 using SYD (159,453.13)
Furniture and Fixture Carrying Value as of 2019 478,359.38 5
PROBLEM II
2017 Should be entries
Franchise @PV+cash [(200000*3.604776202)+200000)] 920,955.24
Discount 279,044.76
Cash 200,000.00
Notes Payable 1,000,000.00

Interest Expense 86,514.63

Discount 86,514.63

Amortization Expense 46,047.76

Franchise 46,047.76

2018 Should be entries

Notes Payable 200,000.00
Cash 200,000.00

Interest Expense 72,896.38

Discount 72,896.38

Amortization Expense 46,047.76

Franchise 46,047.76

Adjusting Journal Entries

Discount 119,633.75 6
Interest Expense 72,896.38
Amortization Expense 46,047.76
Retained Earnings 132,562.39
Franchise 371,140.28

Organizational Cost 200,000.00

Amortization made for 2016 for 9 months (30,000.00)
Amortization made for 2017 (40,000.00)
Amortization made for 2018 - Amortization Expense (40,000.00)
Carrying Value of Organizational Cost in the books as of 2018 90,000.00

Adjusting Journal Entries

Retained Earnings 130,000.00 7
Organizational Cost 90,000.00
Amortization expense 40,000.00

Franchise Cost 920,955.24

Accumulated Amortization 92,095.52
Carrying value of Franchise as of 2018 828,859.72 8
Patent
1
11

Computer Software
5
10

Expense
3
4
8
12
13
14
15
16

Property, Plant and Equipment

9
6

Goodwill
Consideration Given
Net Assets:
Asset
Liabilities
Goodwill

Patent
Cost

Carrying value as of 2013beg.

Competetive Patent
Total value of patent as of 2013 beg.

Carrying value as of 2014beg.

Related Patent

Remaining prolonged life

Carrying value as of 2014 end

Franchise Cost (100,000 x 2.486851991) + 200,000

Useful life
Continuing Franchise Fee(300,000 x 5%)
Training Fee
Notes Payable interest expense
Total Expense related to the Franchise

Patent amortization
Franchise total expense
Total Expense for 2014

Cost
Discount
Freight in
Installation Cost
Sample cost
Sample proceeds
Total Cost of Machinery

Recoverable Cost (whichever is higher)

Salvage Value
Depreciable cost
Divide it by remaining usefullife
Depreciation expense

Carrying Value as if no impairment 500,000-(45,000x6)

Carrying Value with impaiment 260,00-(26250*4)
Gain on Remeasurement

Depreciation Expense for 2016

Entries:
Furniture and Fixture @ FV of asset given - Cash received
Cash
Accumulated Depreciation

Cost
Salvage Value
Depreciable Amount
Usefullife
Yearly depreciation
March to Dec.depreciation
Depreciation for 2016
Carrying Value as of end of 2016
Total Accumulated Depreciation of Machinery
Divide it by: Total Months Used (Jan1, 2012 to March 1, 2016)
Monthly Depreciation
Number of months used for 2016
Machinery's depreciation for 2016
Depreciation of furniture and fixture
Total Depreciation Expense for 2016
Patent
Attorney’s fees to obtain patent
Other cost of registering patent

Computer Software
Coding costs after establishment of technological feasibility of computer software
Testing costs after establishment of technological feasibility of computer software

Expense
Labor and material costs incurred in producing a prototype of computer software
Costs incurred for coding and testing to establish technological feasibility of computer software
Cost of conference for the introduction of this new product
Salaries of employees doing the research of computer software
Equipment purchased for current project’s research and development with no alternative use (5yrs useful life)
Modification to the formulation of the program
Advertising expense to introduce a new product
Attorney’s fees paid defending the patent successfully

Property, Plant and Equipment

Equipment purchased for current and future projects’ research and development (3yrs useful life)
Computer software acquired in order for the computer to be used

Goodwill
Consideration Given
Net Assets:

Liabilities
Goodwill

Patent

Carrying value as of 2013beg.

Competetive Patent
Total value of patent as of 2013 beg.

Carrying value as of 2014beg.

Related Patent

Remaining prolonged life

Carrying value as of 2014 end

Franchise Cost (100,000 x 2.486851991) + 200,000

Useful life
Continuing Franchise Fee(300,000 x 5%)
Training Fee
Notes Payable interest expense
Total Expense related to the Franchise

Patent amortization
Franchise total expense
Total Expense for 2014

Discount
Freight in
Installation Cost
Sample cost
Sample proceeds
Total Cost of Machinery

Recoverable Cost (whichever is higher)

Salvage Value
Depreciable cost
Divide it by remaining usefullife
Depreciation expense

Carrying Value as if no impairment 500,000-(45,000x6)

Carrying Value with impaiment 260,00-(26250*4)
Gain on Remeasurement

Depreciation Expense for 2016

Entries:
Furniture and Fixture @ FV of asset given - Cash received

Accumulated Depreciation
Machinery
Gain on Exchange

Salvage Value
Depreciable Amount
Usefullife
Yearly depreciation
March to Dec.depreciation
Depreciation for 2016
Carrying Value as of end of 2016
Total Accumulated Depreciation of Machinery
Divide it by: Total Months Used (Jan1, 2012 to March 1, 2016)
Monthly Depreciation
Number of months used for 2016
Machinery's depreciation for 2016
Depreciation of furniture and fixture
Total Depreciation Expense for 2016
 50000
58,000

108,000 16

220,000
25,000

245,000 17

55,500
60,000
90,000
33,500
200,000
45,000
33,000
50000

567,000 18

30,000
10,000

40,000 19

25,572,000.00

44,172,000.00
19,100,000.00 25,072,000.00
500,000.00 20

400,000
1/2
200,000.00
100000
300,000.00
0.80
240,000.00
250000
490,000.00
0.88
428,750.00 21

448,685.20
10 44,868.52
15,000.00
 50,000
24,868.52
134,737.04 22

61,250.00
134,737.04
195,987.04 23

380,600.00
(20,000.00)
17,000.00
120,000.00
5,000.00
(2,600.00)
500,000.00 24

260,000.00
(50,000.00)
210,000.00
8
26,250.00 25

230,000.00
155,000.00
75,000.00 26

45,000.00 27

117,000.00
18,000.00
317,250.00
430,000.00
22,250.00 28

117,000.00 117,000.00
(5,400.00)
111,600.00
8.00
13,950.00
0.83
11,625.00 (11,625.00)
105,375.00 29
317,250.00
50.00
6,345.00
2.00
12,690.00
11,625.00
24,315.00 30