Muharraq Co. paid the following different costa in 2020:1. S1,200,000 to acquire a machine to be used in the RAD projects The machine has a 6-year useful life (Muharaq Co. started wing the machine on 1 Jamuary 2020 and a igha ledepreciation method is applied)2. $750,000 for construction costs incurred to open a new plant.3. $230,000 for salaries expenses to the workers who investigate a new formula.4. $310,000 for material and equipment used in research and development project5. $270,000 for advertising expenses to the new products6. S190,000 for consultation services provided by Manama Co. during the rescarch procesRequired:How much Muharraq Co. should record as Research & Development expense in 20207 (Show your calculations)

To provide new goods or services, companies often spent monies on the research of new products and…

1. S1,200,000 to acquire a machine to be used in the RAD projects The machine han a6 year useful life (Muhan Co stated wing the machine on1 Jay 200 ndaigh l depreciation method is applied) 2. $750,000 for construction costs incurred to open a new plant. 3. $230,000 for salaries expenses to the workers who ivestigate a ew formuls 4 5310,000 for material and equipment used in research and development project 5. $270,000 for advertising expenses to the new products 6 $190,000 for consultation services provided by Manama Co during the rescarch process Required: How much Muharraq Co. should record as Research & Development expense in 20207 (Show your calculations)

1. S1,200,000 to acquire a machine to be used in the RAD projects The machine han a6 year useful life (Muhan Co stated wing the machine on1 Jay 200 ndaigh l depreciation method is applied) 2. $750,000 for construction costs incurred to open a new plant. 3. $230,000 for salaries expenses to the workers who ivestigate a ew formuls 4 5310,000 for material and equipment used in research and development project 5. $270,000 for advertising expenses to the new products 6 $190,000 for consultation services provided by Manama Co during the rescarch process Required: How much Muharraq Co. should record as Research & Development expense in 20207 (Show your calculations)

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 11E: On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated...

See similar textbooks

Similar questions

On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.
Calico Inc. purchased a patent on a new drug. The patent cost $21,000. The patent has a life of twenty years, but Calico only expects to be able to sell the drug for fifteen years. Calculate the amortization expense and record the journal for the first-year expense.
Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a life of twenty years, but Calico expects to be able to sell the drug for fifty years. Calculate the amortization expense and record the journal for the first years expense.
Hathaway Company purchased a copying machine for 8,700 on October 1, 2019. The machines residual value was 500 and its expected service life was 5 years. Hathaway computes depreciation expense to the nearest whole month. Required: 1. Compute depredation expense (rounded to the nearest dollar) for 2019 and 2020 using the: a. straight-line method b. sum-of-the-years-digits method c. double-declining-balance method 2. Next Level Which method produces the highest book value at the end of 2020? 3. Next Level Which method produces the highest charge to income in 2020? 4. Next Level Over the life of the asset, which method produces the greatest amount of depreciation expense?
Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: 3,000 Depreciation method for financial statements: straight-line method Depreciation for income tax purposes: MACRS (3-year life) From 2019 through 2023, each year, Hunter had sales of 100,000, cost of goods sold of 60,000, and operating expenses (excluding depreciation) of 15,000. The truck was disposed of on December 31, 2023, for 2,000. Required: 1. Prepare an income statement for financial reporting through pretax accounting income for each of the 5 years, 2019 through 2023. 2. Prepare, instead, an income statement for income tax purposes through taxable income for each of the 5 years, 2019 through 2023. 3. Compare the total income for all 5 years under Requirements 1 and 2.
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a ten-year remaining legal life was purchased for $300,000. The patent will be usable for another eight years. B. A patent was acquired on a new smartphone. The cost of the patent itself was only $24,000, but the market value of the patent is $600,000. The company expects to be able to use this patent for all twenty years of its life.
Lebo purchased a machine on 1 January 2019 for R1 500 000. The company incurred installation costs of R30 000, testing costs of R15 000, and R10 000 of insurance for the first year of operation. The machine has an estimated useful life of five years and is expected to produce 10 000 000 units over its life span, with an estimated residual value of R125 000. 1.Calculate the initial value of the machine. 2.What is the book value of the machine after three years using the reducing balance method? Assuming the rate of depreciation is 40%. Compare the impact of the straight-line method reducing balance and units of production methods method on each of the following: (i) Trend on depreciation expense over the five-year life (ii) Trend on net income over the five-year life (iii) Cash flow from operations over the five-year life (iv) Debt-to-equity ratio (v) PPE (fixed assets) turnover
Proton Company purchased a new equipment on a deferred payment basis. A down payment of P50,000 was made and four monthly installments of P125,000 are to be made at the end of each month. The cash equivalent price of the machine was P475,000. The company incurred and paid installation costs amounting to P15,000. At what amount shall the equipment be capitalized? a. P565,000 b. P490,000 c. P475,000 d. P550,000
A corporation bought a machine for RP 8,000 with a commercial useful life of 4 years and a fiscal useful life of 3 years, but no salvage value, in early 2019. In both commercial and fiscal terms, machines are assembled utilizing the straight-line method. In addition, the company will receive Rp. 6,000 in 2019, with the warranty charge anticipated to be 10% of revenue. The warranty cost is due in fiscal year 2022. The general rate of taxation is 30%. Required: Calculate and explain the deferred tax asset or obligation for the two transactions at the end of 2019!
Vincent Limited paid $100,000 to purchase equipment at the beginning of 2020. Vincent Limited estimated the useful life of the equipment to be 5 years or 200,000 units. The equipment will be considered fully amortized a when the balance in the Accumulated Depreciation account reaches $100,000. The equipment produced 50,000 units in 2020. Required:a. Determine the estimated residual value of the equipment.b. What is the amortizable cost of the equipment?c. Calculate depreciation expense for 2020 under each of the following methods:i. straight-lineii. units-of-productioniii. double-declining-balanced. If you were a new accountant in a company and you were asked to determine how best to depreciate a new machine they just bought; how would you determine the best method? What is the difference between your method and other method? How does your method affect the income statement?
1. The Fairy Company purchased a site for limestone quarry for P 100,000 on January 2, 2020. It estimates that the quarry will yield 400,000 tons of limestone. It estimates that its retirement obligation has a fair value of P 20,000 after which the land can be sold for P 10,000. In 2020, 80,000 tons were quarried and 60,000 tons sold. Cost of production (excluding depletion) are P4 per ton. Required: a. Compute the depletion cost per ton. b. Compute the total cost of inventory at December 31, 2020. c. Compute the total cost of goods sold for 2020. 2. Cooler Company acquired a tract of land containing an extractable natural resource. Cooler is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 5,000,000 tons and that the land will have of P1,000,000 after restoration. Relevant cost information as follows: Land P 9,000,000…
The D Company self constructed an asset for its own use. Construction started on January 1,2020 and the asset was completed on December 31,2020. Costs incurred during the year were as follows: January1- P 400,000April- 500,000August1 - 480,000December1- 180,000 If the company had a two year, 18% loan of P 500,000, specially obtained to finance the asset construction, what is the capitalized interest added to the cost of the self-constructed asset? P 178,200 P 90,000 P 280,800 P 140,000