How to calculate the Amortization Expense?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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How to calculate the Amortization Expense?

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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