ACCT.WK11

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Colorado State University, Global Campus *

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5440

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Accounting

Date

Feb 20, 2024

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docx

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Uploaded by MagistrateWren2087

1. At the beginning of the year, Plummer's Sports Center bought three used fitness machines from Primo Fitness, an established supplier of used, new and refurbished gym equipment in Southern California. The machines immediately were overhauled and started operating. The machines were different; therefore, each had to be recorded separately in the accounts. Machine A Machine B Machine C Invoice price paid for asset $23,00 0 $36,10 0 $19,1 00 Shipping costs (paid by Plummer) 2,300 2,300 2,000 Renovation costs prior to use 3,700 3,000 2,700 By the end of the first year, each machine had been operating 5,400 hours. Total Cost Machine A Machine B Machine C 2. At the beginning of the year, Plummer's Sports Center bought three used fitness machines from Primo Fitness, an established supplier of used, new and refurbished gym equipment in Southern California. The machines immediately were overhauled and started operating. The machines were different; therefore, each had to be recorded separately in the accounts. Machine A Machine B Machine C Invoice price paid for asset $23,00 0 $36,10 0 $19,1 00 Shipping costs (paid by Plummer) 2,300 2,300 2,000 Renovation costs prior to use 3,700 3,000 2,700 By the end of the first year, each machine had been operating 5,400 hours.

Prepare the entry to record depreciation expense at the end of Year 1, assuming the following. Note: Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field. ESTIMATES Machi ne Life Residual Value Depreciation Method A 9 years $2,900 Straight-line B 77,000 hours 2,900 Units-of-production C 7 years 2,700 Double-declining- balance record the depreciation expense for one year Note: Enter debits before credits. Transaction General Journal Debit Credit a 3. Fausett Electronics, Incorporated, headquartered in Richfield, Minnesota, is one of the leading consumer electronics retailers, operating more than 1,000 stores across the globe. The following was reported in a recent annual report: CONSOLIDATED BALANCE SHEETS ($ in millions) Current Year Prior Year ASSETS Property and Equipment Land and buildings $764 $729 Leasehold improvements 2,024 1,738 Fixtures and equipment 4,074 3,045 Property under capital and finance leases 124 58 6,986 5,570 Less accumulated depreciation 2,769 2,285

CONSOLIDATED BALANCE SHEETS Net property and equipment 4,217 3,285 . Assuming that Fausett Electronics did not sell any property, plant, and equipment in the current year, what was the amount of depreciation expense recorded during the current year? Note: Enter your answer in millions. Depreciation expense : ????? in millions 4. Fausett Electronics, Incorporated, headquartered in Richfield, Minnesota, is one of the leading consumer electronics retailers, operating more than 1,000 stores across the globe. The following was reported in a recent annual report: CONSOLIDATED BALANCE SHEETS ($ in millions) Current Year Prior Year ASSETS Property and Equipment Land and buildings $764 $729 Leasehold improvements 2,024 1,738 Fixtures and equipment 4,074 3,045 Property under capital and finance leases 124 58 6,986 5,570 Less accumulated depreciation 2,769 2,285 Net property and equipment 4,217 3,285 Assume that Fausett Electronics failed to record depreciation during the current year. Indicate the effect of the error (i.e., overstated or understated) on the following ratios: a. Earnings per share. b. Fixed asset turnover. c. Current ratio. d. Return on assets. 5. The notes to a recent annual report from Suzie’s Shoe Corporation indicated that the company acquired another company, Steve’s Shoes, Incorporated.

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Assume that Suzie’s acquired Steve’s Shoes on January 5 of the current year. Suzie’s acquired the name of the company and all of its assets for $516,000 cash. Suzie’s did not assume the liabilities. The transaction was closed on January 5 of the current year, at which time the balance sheet of Steve’s Shoes reflected the following book values. An independent appraiser estimated the following market values for the assets. Steve’s Shoes, Incorporated January 5 of the Current Year Book Value Market Value Accounts receivable (net) $37,000 $37,000 Inventory 211,000 200,000 Fixed assets (net) 26,000 35,200 Other assets 6,000 15,000 Total assets $280,00 0 Liabilities $74,000 Stockholders’ equity 206,000 Total liabilities and stockholders’ equity $280,00 0 Required: Compute the amount of goodwill resulting from the purchase. ( Hint: Assets are purchased at market value in conformity with the cost principle.) Goodwill: ????? 6. The notes to a recent annual report from Suzie’s Shoe Corporation indicated that the company acquired another company, Steve’s Shoes, Incorporated. Assume that Suzie’s acquired Steve’s Shoes on January 5 of the current year. Suzie’s acquired the name of the company and all of its assets for $516,000 cash. Suzie’s did not assume the liabilities. The transaction was closed on January 5 of the current year, at which time the balance sheet of Steve’s Shoes reflected the following book values. An independent appraiser estimated the following market values for the assets. Steve’s Shoes, Incorporated January 5 of the Current Year Book Value Market Value Accounts receivable (net) $37,000 $37,000 Inventory 211,000 200,000 Fixed assets (net) 26,000 35,200 Other assets 6,000 15,000 Total assets $280,00 0

Steve’s Shoes, Incorporated January 5 of the Current Year Book Value Market Value Liabilities $74,000 Stockholders’ equity 206,000 Total liabilities and stockholders’ equity $280,00 0 . Compute the adjustments that Suzie’s Shoes Corporation would make at the end of the current year (ending December 31) for the following items acquired from Steve's Shoes: Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. a. Depreciation of the fixed assets (straight line), assuming an estimated remaining useful life of 11 years and no residual value. b. Goodwill (an intangible asset with an indefinite life Record the straight-line depreciation of fixed assets , assuming an estimated remaining useful life of 11 years and no residual value  ote: Enter debits before credits. Event General Journal Debit Credit a. Record amortization of the goodwill (an intangible asset with an indefinite life) Note: Enter debits before credits.