Calculate the acquisition cost of the Mixture Machine that will be used as the base for future depreciation charge. (b)Provide the journal entries that would appear in Sunflower Ltd’s books to account for the acquisition of the Mixture Machine (c) Will the maintenance cost be included in the acquisition cost of the machine? Justify your answer.
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Sunflower Ltd acquires a Mixture Machine from Lilly Ltd for the following consideration:
Cash
$60 000
Land
In the books of Sunflower Ltd the land is recorded at its cost of $300 000. It has a fair value of $280 000 due to toxic substance being discovered in the land.
Equipment:
In the books of Sunflower Ltd the equipment is recorded at a cost of $150000. The equipment has an
Settlement of liability
Sunflower Ltd also settles a liability of Lilly Ltd’s bank loan of $90 000 as part of the Mixture Machine acquisition.
Other costs
Sunflower Ltd also spend $15000 as the installation cost. Insurance costs during transportation was $7500. Freight cost for the machine was $2100. During first year of operation, the company paid $3000 as the maintenance cost for the machine.
REQUIRED
(a)Calculate the acquisition cost of the Mixture Machine that will be used as the base
for future depreciation charge.
(b)Provide the
(c) Will the maintenance cost be included in the acquisition cost of the machine? Justify your answer.
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- The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000. B. A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000. Determine the annual amortization amount for each intangible asset.Garcia Co. owns equipment that costs $150,000, with accumulated depreciation of $65,000. Garcia sells the equipment for cash. Record the journal entry for the sale of the equipment if Garcia were to sell the equipment for the following amounts: A. $90,000 cash B. $85,000 cash C. $80,000 cashSunflower Ltd acquires a Mixture Machine from Lilly Ltd for the following consideration:1) Cash$60 0002) LandIn the books of Sunflower Ltd the land is recorded at its cost of $300 000. It has a fair value of $280 000 due to toxic substance being discovered in the land.3) Equipment:In the books of Sunflower Ltd the equipment is recorded at a cost of $150000. The equipment has an accumulated depreciation balance of $60000. The fair value of the equipment is $690004) Settlementof liabilitySunflower Ltd also settles a liability of Lilly Ltd’s bank loan of $90 000 as part of the Mixture Machine acquisition.5) Other costsSunflower Ltd also spend $15000 as the installation cost. Insurance costs during transportation was $7500. Freight cost for the machine was $2100. During first year of operation, the company paid $3000 as the maintenance cost for the machine.REQUIRED(a)Calculate the acquisition cost of the Mixture Machine that will be used as the base for future depreciation…
- Tea Tree Bay Ltd acquires a Gizmo Machine from Jetsons Ltd for the following consideration: 1) Cash: $20,000 2) Land: In the books of Tea Tree Bay Ltd the land is recorded at its cost of $100,000. It has a fair value of $140,000. 3) Equipment: In the books of Tea Tree Bay Ltd the equipment is recorded at a cost of $50,000. The equipment has an accumulated depreciation balance of $20,000. The fair value of the equipment is $23,000 4) Assumption of liability: Tea Tree Bay Ltd also agrees to assume the liability of Jetsons Ltd’s bank loan of $30,000 as part of the Gizmo Machine acquisition. 5) Other associated costs: Tea Tree Bay Ltd also spend $5,000 as the installation cost. Testing cost was $2,500. Transportation cost for the machine was $700. During first year of operation, the company paid $650 as the maintenance cost for the machine. Required: a) Calculate the acquisition cost of the Gizmo Machine that will be used as the base for future depreciation charge. b)…Tea Tree Bay Ltd acquires a Gizmo Machine from Jetsons Ltd for the following consideration:Cash $20,000Land In the books of Tea Tree Bay Ltd the land is recordedat its cost of $100,000. It has a fair value of $140,000.Equipment: In the books of Tea Tree Bay Ltd the equipment is recorded at a cost of$50,000. The equipment has an accumulated depreciation balance of $20,000.The fair value of the equipment is $23,000Assumptionof liabilityTea Tree Bay Ltd also agrees to assume the liability of Jetsons Ltd’s bank loanof $30,000 as part of the Gizmo Machine acquisition.OtherassociatedcostsTea Tree Bay Ltd also spend $5,000 as the installation cost. Testing cost was$2,500. Transportation cost for the machine was $700.During first year of operation, the company paid $650 as the maintenance costfor the machine.Required:a) Calculate the acquisition cost of the Gizmo Machine that will be used as the base for futuredepreciation charge. b) Provide the journal entries that would appear in Tea Tree…Tea Tree Bay Ltd acquires a Gizmo Machine from Jetsons Ltd for the following consideration:Cash $20,000Land In the books of Tea Tree Bay Ltd the land is recordedat its cost of $100,000. It has a fair value of $140,000.Equipment: In the books of Tea Tree Bay Ltd the equipment is recorded at a cost of$50,000. The equipment has an accumulated depreciation balance of $20,000.The fair value of the equipment is $23,000Assumptionof liabilityTea Tree Bay Ltd also agrees to assume the liability of Jetsons Ltd’s bank loanof $30,000 as part of the Gizmo Machine acquisition.OtherassociatedcostsTea Tree Bay Ltd also spend $5,000 as the installation cost. Testing cost was$2,500. Transportation cost for the machine was $700.During first year of operation, the company paid $650 as the maintenance costfor the machine.Required:a) Calculate the acquisition cost of the Gizmo Machine that will be used as the base for futuredepreciation charge. b) Provide the journal entries that would appear in Tea Tree…
- Tea Tree Bay Ltd acquires a Gizmo Machine from Jetsons Ltd for the following consideration:Cash $20,000Land In the books of Tea Tree Bay Ltd the land is recordedat its cost of $100,000. It has a fair value of $140,000.Equipment: In the books of Tea Tree Bay Ltd the equipment is recorded at a cost of$50,000. The equipment has an accumulated depreciation balance of $20,000.The fair value of the equipment is $23,000Assumptionof liabilityTea Tree Bay Ltd also agrees to assume the liability of Jetsons Ltd’s bank loanof $30,000 as part of the Gizmo Machine acquisition.OtherassociatedcostsTea Tree Bay Ltd also spends $5,000 as the installation cost. Testing cost was$2,500. The transportation cost for the machine was $700.During the first year of operation, the company paid $650 as the maintenance costfor the machine.Required:a) Calculate the acquisition cost of the Gizmo Machine that will be used as the base for futuredepreciation charges.b) Provide the journal entries that would appear in…Tea Tree Bay Ltd acquires a Gizmo Machine from Jetsons Ltd for the following consideration: Cash $20,000 Land In the books of Tea Tree Bay Ltd the land is recorded at its cost of $100,000. It has a fair value of $140,000. Equipment: In the books of Tea Tree Bay Ltd the equipment is recorded at a cost of $50,000. The equipment has an accumulated depreciation balance of $20,000. The fair value of the equipment is $23,000 Assumption of liability Tea Tree Bay Ltd also agrees to assume the liability of Jetsons Ltd’s bank loan of $30,000 as part of the Gizmo Machine acquisition. Other associated costs Tea Tree Bay Ltd also spend $5,000 as the installation cost. Testing cost was $2,500. Transportation cost for the machine was $700. During first year of operation, the company paid $650 as the maintenance cost for the machine. Required: Calculate the acquisition cost of the Gizmo Machine that will be used as the base for future depreciation charge. Provide the…Tea Tree Bay Ltd acquires a Gizmo Machine from Jetsons Ltd for the following consideration:Cash$20,000LandIn the books of Tea Tree Bay Ltd the land is recordedat its cost of $100,000. It has a fair value of $140,000.Equipment:In the books of Tea Tree Bay Ltd the equipment is recorded at a cost of $50,000. The equipment has an accumulated depreciation balance of $20,000. The fair value of the equipment is $23,000Assumption of liability Tea Tree Bay Ltd also agrees to assume the liability of Jetsons Ltd’s bank loan of $30,000 as part of the Gizmo Machine acquisition.Other associated costs Tea Tree Bay Ltd also spend $5,000 as the installation cost. Testing cost was $2,500. Transportation cost for the machine was $700. During first year of operation, the company paid $650 as the maintenance cost for the machine. Required: a) Calculate the acquisition cost of the Gizmo Machine that will be used as the base for future depreciation charge. b) Provide the journal entries that would appear in…
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