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How to calculate the Amortization Expense?

How to calculate the Amortization Expense?

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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How to calculate the Amortization Expense? 

### Educational Content for Accounting Students: Precision Construction Transactions and Depreciation #### Required Information **Context:** The following information applies to the questions displayed below and involves Precision Construction's financial transactions within a specific year. **Transactions:** - **January 2:** Purchased a bulldozer for $278,000 by paying $34,000 cash and signing a $244,000 note due in five years. - **January 3:** Replaced the steel tracks on the bulldozer at a cost of $34,000, purchased on account. These new steel tracks enhance the bulldozer's operating efficiency. - **January 30:** Issued a check for the amount owed on account for the work completed on January 3. - **February 1:** Repaired the leather seat on the bulldozer and wrote a check for the full $2,200 cost. - **March 1:** Paid $12,000 cash for the rights to use computer software for a two-year period. #### Instructions for Accounting Tasks 1. **Journal Entries Preparation:** - Record the journal entries for the listed transactions. 2. **Depreciation and Amortization Calculation:** - Calculate the amount of depreciation and amortization for tangible and intangible assets. - Use the double-declining-balance method for equipment with a useful life of five years and a residual value of $54,000. - Amortize the licensing right using the straight-line method over two years with no residual value. 3. **Recording Depreciation and Amortization:** - Prepare a journal entry to log the calculated depreciation and amortization. #### Detailed Explanation of Tasks **Unfinished Journal Entry Solution:** - A table displays the journal entry required by March 31: - **Depreciation Expense:** Debit of $31,200 with no corresponding credit entry currently shown. - **Amortization Expense:** Indicated but not completed with a credit entry. **Note:** Ensure all fields are completed and balanced in your financial entries. If a transaction/event does not require a journal entry, select "No Journal Entry Required." This educational segment aids students in understanding and applying concepts of depreciation and amortization within a real-world scenario in financial accounting.
Transcribed Image Text:### Educational Content for Accounting Students: Precision Construction Transactions and Depreciation #### Required Information **Context:** The following information applies to the questions displayed below and involves Precision Construction's financial transactions within a specific year. **Transactions:** - **January 2:** Purchased a bulldozer for $278,000 by paying $34,000 cash and signing a $244,000 note due in five years. - **January 3:** Replaced the steel tracks on the bulldozer at a cost of $34,000, purchased on account. These new steel tracks enhance the bulldozer's operating efficiency. - **January 30:** Issued a check for the amount owed on account for the work completed on January 3. - **February 1:** Repaired the leather seat on the bulldozer and wrote a check for the full $2,200 cost. - **March 1:** Paid $12,000 cash for the rights to use computer software for a two-year period. #### Instructions for Accounting Tasks 1. **Journal Entries Preparation:** - Record the journal entries for the listed transactions. 2. **Depreciation and Amortization Calculation:** - Calculate the amount of depreciation and amortization for tangible and intangible assets. - Use the double-declining-balance method for equipment with a useful life of five years and a residual value of $54,000. - Amortize the licensing right using the straight-line method over two years with no residual value. 3. **Recording Depreciation and Amortization:** - Prepare a journal entry to log the calculated depreciation and amortization. #### Detailed Explanation of Tasks **Unfinished Journal Entry Solution:** - A table displays the journal entry required by March 31: - **Depreciation Expense:** Debit of $31,200 with no corresponding credit entry currently shown. - **Amortization Expense:** Indicated but not completed with a credit entry. **Note:** Ensure all fields are completed and balanced in your financial entries. If a transaction/event does not require a journal entry, select "No Journal Entry Required." This educational segment aids students in understanding and applying concepts of depreciation and amortization within a real-world scenario in financial accounting.
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