ADMS 3585 - Worksheet 8 answers

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Georgian College *

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3585

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Accounting

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Nov 24, 2024

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Class 10 PASS Worksheet 1. Wolf’s Delivery buys a commercial van with a list price of $159,000. According to the terms of the transaction, the dealer will grant Wolf’s Delivery with a 10% reduction in list price. If Wolf’s pays the invoice within 30 days, they will receive an additional 5% cash discount on the net price. There are non-refundable sales taxes of $550, and Wolf’s paid an extra to $700 for rust-proofing the vans. Wolf was able to pay the invoice before 30 days. Therefore, what amount will Wolf record as the cost of the van? a) $ 143,100 b) $ 137,195 c) $ 143,650 d) $ 152,300 e) $ 151,050 (159,000 x 0.90 x 0.95) + 550 + 700 = 137,195 2. On January 2, 2020, Tangerine Nuclear Company traded in an old generator for a newer model generator. The following information relates to the old and new generators: Old Generator Original cost $ 15,000,000 Accumulated depreciation as at January 2, 2020 $ 12,000,000 Fair value $ 3,000,000 New Generator List price $ 27,000,000 Cash price without trade-in $ 25,000,000 Cash paid with trade-in $ 11,000,000 What will be the cost of the new generator recorded in Tangerine Nuclear Company’s records? a) $ 15,000,000 b) $ 11,000,000 c) $ 14,000,000 d) $ 27,000,000 e) $ 25,000,000 3,000,000 (fair value of the old generator) + 11,000,000 (cash paid in the trade-in) = 14,000,000

3. On January 1 st 2020, Sweet Treats Inc. acquired a new oven in exchange for an old oven that it purchased on January 1 st 2018, for $430,000. The carrying-value of the old oven on the date of the exchange was $340,000, and its fair value was $370,000. Sweet Treats paid $100,000 cash for the new oven, which had a list price of $500,000. On Sweet Treat’s records, what is the amount that should be recorded for the new oven? a) 340,000 b) 500,000 c) 440,000 d) 470,000 e) 370,000 370,000 (fair value of the old oven) + 100,000 (cash paid in the trade-in) = 470,000 4. On January 2, 2020, Peppermint Corp. purchased a new high-quality enrobing machine. The company makes a $ 40,000 cash down payment for the machine. Peppermint also agrees to pay four annual instalments of $ 80,000 each, starting December 31, 2020, and signs a non-interest- bearing note to this effect. The cash equivalent price of the enrobing machine is not known, but the appropriate interest rate for this type of transaction is 7% per year. Which of the following would Peppermint Corp. record as the cost the enrobing machine (round answers to the nearest dollar)? a) $ 350,977 b) $ 310,977 c) $ 270,977 d) $ 135,489 e) $ 61,032 This calculation is to find the PV of the annuity! N = 4, I/Y = 7%, PMT = 80,000, FV = 0 CPT PV = 270,977 Total = 270,977 + 40,000 = 310,977 5. On January 2, 2020, Phoenix Corp. purchases a convectional glass tempering furnace. The company makes a $ 2,530,000 cash down payment, and agrees to pay eight semi-annual instalments of $ 560,000 each, starting July 1, 2020, signing a non-interest-bearing note to this effect. The cash equivalent price of the machine is not known, but the appropriate interest rate for this type of transaction is 9% per year. Rounding to the nearest dollar (if necessary), Phoenix should record the cost of the machine at a) $ 6,850,696 b) $ 5,879,700 c) $ 2,923,784 d) $ 3,693,696 e) $ 6,223,696 N = 8, I/Y = 9%/2 = 4.5%, PMT = 560,000, FV = 0 CPT PV = 3,693,696 Total = 3,693,696 + 2,530,000 = 6,223,696

Short Answer E12.1 (LO 2, 5, 10) (Classification Issues—Intangibles) The following is a list of items that could be included in the intangible assets section of the statement of financial position: 1. An investment in a subsidiary company - long-term investment in the SFP 2. Timberland – biological asset in the SFP 3. The cost of an engineering activity needed to advance a product's design to the manufacturing stage 4. A lease prepayment (six months of rent paid in advance) - prepaid rent on SFP 5. The cost of equipment obtained under a capital lease – PPE on SFP 6. The cost of searching for applications for new research findings – R&D expense on the income statement 7. Costs incurred in forming a corporation – expense on income statement 8. Operating losses incurred in the start-up of a business – income statement 9. Training costs incurred in the start-up of a new operation – expense on income statement 10. The purchase cost of a franchise 11. Goodwill generated internally – any costs related to creating internal goodwill would be expensed on income statement. 12. The cost of testing in the search for product alternatives – R&D expense on income statement 13. Goodwill acquired in the purchase of a business – Goodwill (Remember: this is a separate line item from intangible assets) on SFP. 14. The cost of developing a patent – R&D expense on income statement 15. The cost of purchasing a patent from an inventor 16. Legal costs incurred in securing a patent 17. Unrecovered costs of a successful legal suit to protect a patent 18. The cost of conceptual formulation of possible product alternatives – R&D expense on income statement 19. The cost of purchasing a copyright 20. Product development costs (assuming that all 6 criteria related internally developed intangible assets have been met) 21. Long-term receivables – Non-current on SFP 22. The cost of developing a trademark – R&D expense on income statement 23. The cost of purchasing a trademark 24. The cost of an annual update of payroll software - expense on income statement 25. A five-year advertising contract for rights of advertising by a top hockey player in Canada 26. Borrowing costs specifically identifiable with an internally developed intangible asset Instructions a. Indicate which items on the list would be reported as intangible assets on the statement of financial position. b. Indicate how, if at all, the items that are not reportable as intangible assets would be reported in the financial statements.

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Long Answer

Balance Jan 1 2020 – Land account 310,000 Land site 621 Acquisition cost 800,000 Real estate agent fee 7,000 Clearing of land (33,500 – 11,000) 22,500 829,500 Land site 622 Acquisition Cost 560,000 Demolition cost 28,000 588,000 Ending Balance 1,727,500 Opening Balance – Building Structure Account 883,000 Construction Cost 340,000 Excavation Cost 38,000 Architectural costs 15,000 Permit fee 2,500 395,500 Ending Balance 1,278,500 Opening Balance – Building Roof Account 0 Green Roof for the new building 36,000 Ending Balance 36,000 Opening Balance - Leasehold Improvements 705,000 Office Space 89,000 Ending Balance 794,000 Opening Balance – Equipment 845,000 Purchase of new equipment: Invoice Price 111,000

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