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Question : Chapter 06 - Accounting for and Presentation of Property, Plant,

Chapter 06 - Accounting for and Presentation of Property, Plant, and Equipment, and Other Noncurrent Assets

Essay Questions

34.Lone Star Sales & Service acquired a new machine that cost $42,000 in early 2010. The machine is expected to have a five-year useful life and is estimated to have a salvage value of $7,000 at the end of its life. (Round your final answers to the nearest dollar).
(a.) Using the straight-line depreciation method, calculate the depreciation expense to be recognized in the second year of the machine's life and calculate the accumulated depreciation after the third year of the machine's life.
(b.) Using the double declining balance depreciation method, calculate the depreciation expense for the third year of the machine's life and the net book value of the machine at this point in time.
(c.) Using the sum-of-the-years digits depreciation method, calculate the amount of accumulated depreciation after the third year of the machine's life.

35.Goodwill results from the purchase of one firm by another for a price that is greater than the fair market value of the net assets acquired. On January 1, 2011, Blue Grass Co. purchased Red Grass Co for $1,200,000 when the net assets were valued at $1,000,000. Goodwill will be tested annually for impairment. Assume that after the first year there was an impairment of $15,000.
Required: (a.) Compute the value of goodwill to be recorded on the books of Blue Grass Company upon the purchase of the business.
(b.) What is impairment and how is the first year's impairment recorded in the books?

6-1

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