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1. **Oliver Company** purchased tool sharpening equipment on October 1 for $138,000. The equipment was expected to have a useful life of three years or 13,000 operating hours, and a residual value of $7,700. The equipment was used for 1,650 hours during Year 1, 4,700 hours in Year 2, 3,850 hours in Year 3, and 2,800 hours in Year 4. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by: a. the straight-line method b. the units-of-activity method c. the double-declining-balance method 2. **Farm Fresh Agriculture Company** purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000. a. What is the amount of goodwill in this transaction? b. What is Farm Fresh Agriculture Company's journal entry to record the purchase of Sunny Side Egg Distribution? c. What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?

1. **Oliver Company** purchased tool sharpening equipment on October 1 for $138,000. The equipment was expected to have a useful life of three years or 13,000 operating hours, and a residual value of $7,700. The equipment was used for 1,650 hours during Year 1, 4,700 hours in Year 2, 3,850 hours in Year 3, and 2,800 hours in Year 4. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by: a. the straight-line method b. the units-of-activity method c. the double-declining-balance method 2. **Farm Fresh Agriculture Company** purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000. a. What is the amount of goodwill in this transaction? b. What is Farm Fresh Agriculture Company's journal entry to record the purchase of Sunny Side Egg Distribution? c. What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. **Oliver Company** purchased tool sharpening equipment on October 1 for $138,000. The equipment was expected to have a useful life of three years or 13,000 operating hours, and a residual value of $7,700. The equipment was used for 1,650 hours during Year 1, 4,700 hours in Year 2, 3,850 hours in Year 3, and 2,800 hours in Year 4. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by: a. the straight-line method b. the units-of-activity method c. the double-declining-balance method 2. **Farm Fresh Agriculture Company** purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000. a. What is the amount of goodwill in this transaction? b. What is Farm Fresh Agriculture Company's journal entry to record the purchase of Sunny Side Egg Distribution? c. What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?
Transcribed Image Text:1. **Oliver Company** purchased tool sharpening equipment on October 1 for $138,000. The equipment was expected to have a useful life of three years or 13,000 operating hours, and a residual value of $7,700. The equipment was used for 1,650 hours during Year 1, 4,700 hours in Year 2, 3,850 hours in Year 3, and 2,800 hours in Year 4. Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by: a. the straight-line method b. the units-of-activity method c. the double-declining-balance method 2. **Farm Fresh Agriculture Company** purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000. a. What is the amount of goodwill in this transaction? b. What is Farm Fresh Agriculture Company's journal entry to record the purchase of Sunny Side Egg Distribution? c. What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?
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