PROBLEM 9.8A Depreciation and Disposal of Plant and Intangible Assets O LO9-2, L LO9-3, O LO9-5During the current year, Rothchild, Inc., purchased two assets that are described as follows.Heavy EquipmentPurchase price, $275,000.Expected to be used for 10 years, with a residual value at the end of that time of $50,000.Expenditures required to recondition the equipment and prepare it for use, $75,000.PatentPurchase price, $75,000.Expected to be used for five years, with no value at the end of that time.Rothchild depreciates heavy equipment by the declining-balance method at 150 percent of the straight-line rate. It amortizes intangible assetsby the straight-line method. At the end of two years, because of changes in Rothchild's core business, it sold the patent to another companyfor $35,000.Instructionsa. Compute the amount of depreciation expense on the heavy equipment for each of the first three years of the asset's life.b. Compute the amount of amortization on the patent for each of the two years it was owned by Rothchild.c. Prepare the plant and intangible assets section of Rothchild's balance sheet at the end of the first and second years. Also, calculate theamount of the gain or loss on the patent that would be included in the second year's income statement.

Ans. For computing depreciation under declining balance method for 3 years the computation will be…

PROBLEM 9.8A Depreciation and Disposal of Plant and Intangible Assets O LO9-2, L LO9-3, O LO9-5 During the current year, Rothchild, Inc., purchased two assets that are described as follows. Heavy Equipment Purchase price, $275,000. Expected to be used for 10 years, with a residual value at the end of that time of $50,000. Expenditures required to recondition the equipment and prepare it for use, $75,000. Patent Purchase price, $75,000. Expected to be used for five years, with no value at the end of that time.

PROBLEM 9.8A Depreciation and Disposal of Plant and Intangible Assets O LO9-2, L LO9-3, O LO9-5 During the current year, Rothchild, Inc., purchased two assets that are described as follows. Heavy Equipment Purchase price, $275,000. Expected to be used for 10 years, with a residual value at the end of that time of $50,000. Expenditures required to recondition the equipment and prepare it for use, $75,000. Patent Purchase price, $75,000. Expected to be used for five years, with no value at the end of that time.

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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