Prepare the journal entry to record the exchange of the delivery truck on December 1, 2018. 1) On December 1, 2018, ABC Co. exchanges an old delivery truck for a new truck. The old truck originally cost $40,000 on December 1, 2014 and has a current fair value of $4,750. The Accumulated Depreciation account related to the old delivery truck was $36,250 on the date of exchange. The new truck has a list price of $35,000. The dealer gave ABC Co. a $5,000 trade-in allowance. 2) For the below transactions, record the appropriate adjusting journal entry for amortization at year-end on December 31, 2020. If no entry is required, state so and explain why. a) McLaughlin Inc. purchased another company on July 1, 2020, and recorded Goodwill of $400,000. b) McLaughlin Inc. purchased a Patent for $18,000 on January 1, 2020. In addition, $9,000 was spent in legal costs on January 1, 2020, to successfully defend the Patent in court against competitors. The Patent has a legal life of 20 years and an estimated useful life of 9 years. c) The company purchased a Trademark for $25,000 on May 1, 2020. The rights to the trademark can be renewed indefinitely.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Accounting
Prepare the
1) On December 1, 2018, ABC Co. exchanges an old delivery truck for a new truck. The old truck originally cost $40,000 on December 1, 2014 and has a current fair value of $4,750. The
2) For the below transactions, record the appropriate
a) McLaughlin Inc. purchased another company on July 1, 2020, and recorded
b) McLaughlin Inc. purchased a Patent for $18,000 on January 1, 2020. In addition, $9,000 was spent in legal costs on January 1, 2020, to successfully defend the Patent in court against competitors. The Patent has a legal life of 20 years and an estimated useful life of 9 years.
c) The company purchased a Trademark for $25,000 on May 1, 2020. The rights to the trademark can be renewed indefinitely.
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