24th Edition

ISBN: 9781260158601

Author: Wild

Publisher: MCG

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Textbook Question

Chapter 10, Problem 1BP

Nagy Company makes a lump-sum purchase of several assets on January 1 at a total cash price of $1,800,000. The estimated market values of the purchased assets are building, $890,000; land, $427,200; land improvements, $249,200; and five trucks, $213,600.

Required

1. Allocate the lump-sum purchase price to the separate assets purchased. Prepare the journal entry to record the purchase.
2. Compute the first-year depreciation expense on the building using the straight-line method, assuming a 12-year life and a $120,000 salvage value.
3. Compute the first-year depreciation expense on the land improvements assuming a 10-year life and double-declining-balance depreciation.

Analysis Component

4. Compared to straight-line depreciation, does accelerated depreciation result in payment of less total taxes over the asset’s life?

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Chapter 10, Problem 8AP

Chapter 10, Problem 2BP

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Chapter 10 Solutions

Principles of Financial Accounting.

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Solution Summary: The author explains the accounting term for lump-sum purchase, which is referred to as the basket purchase. The table allocates the purchase price based on the percentage of total assets.

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