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Questions and Answers
What is the total appraised value of the land purchased by ABC Holdings?
What is the total appraised value of the land purchased by ABC Holdings?
900,000
What was the original cost of the land purchased by ABC Holdings?
What was the original cost of the land purchased by ABC Holdings?
750,000
What additional costs were incurred to prepare the land for use by ABC Holdings?
What additional costs were incurred to prepare the land for use by ABC Holdings?
20,500
What is the total value of the building purchased by ABC Holdings after adding the cost of renovations?
What is the total value of the building purchased by ABC Holdings after adding the cost of renovations?
What is the total cost of the land improvements (parking lot)?
What is the total cost of the land improvements (parking lot)?
What is the total amount of cash received by ABC Holdings from the salvage of fixtures from "Building 2"?
What is the total amount of cash received by ABC Holdings from the salvage of fixtures from "Building 2"?
What is the total amount of cash paid by ABC Holdings for the land and buildings?
What is the total amount of cash paid by ABC Holdings for the land and buildings?
What is the total amount of cash paid by ABC Holdings for the land and building improvements?
What is the total amount of cash paid by ABC Holdings for the land and building improvements?
What is the cost of the equipment purchased by the company on July 1, 2014?
What is the cost of the equipment purchased by the company on July 1, 2014?
What is the expected salvage value of the vehicle at the end of its useful life?
What is the expected salvage value of the vehicle at the end of its useful life?
What is the useful life of the vehicle in years?
What is the useful life of the vehicle in years?
What is the useful life of the vehicle in kilometers?
What is the useful life of the vehicle in kilometers?
How many kilometers was the vehicle driven in 2014?
How many kilometers was the vehicle driven in 2014?
What is the depreciation expense for the vehicle in 2014 using the straight-line method?
What is the depreciation expense for the vehicle in 2014 using the straight-line method?
What is the book value of the vehicle at the end of 2014 using the straight-line method?
What is the book value of the vehicle at the end of 2014 using the straight-line method?
What is the depreciation expense for the vehicle in 2014 using the double-declining balance method?
What is the depreciation expense for the vehicle in 2014 using the double-declining balance method?
What is the book value of the vehicle at the end of 2014 using the double-declining balance method?
What is the book value of the vehicle at the end of 2014 using the double-declining balance method?
What is the depreciation expense for the vehicle in 2014 using the units of production method?
What is the depreciation expense for the vehicle in 2014 using the units of production method?
What is the book value of the vehicle at the end of 2014 using the units of production method?
What is the book value of the vehicle at the end of 2014 using the units of production method?
What is the original cost of the machine in the revised depreciation scenario?
What is the original cost of the machine in the revised depreciation scenario?
What is the salvage value of the machine after the modification?
What is the salvage value of the machine after the modification?
What is the cost of the module that is added to the machine in the beginning of year 4?
What is the cost of the module that is added to the machine in the beginning of year 4?
What is the total useful life of the machine after the modification?
What is the total useful life of the machine after the modification?
What is the original cost of the asset in the disposal scenario?
What is the original cost of the asset in the disposal scenario?
What is the accumulated depreciation on the asset at the time of disposal?
What is the accumulated depreciation on the asset at the time of disposal?
What are the proceeds from the disposal of the asset?
What are the proceeds from the disposal of the asset?
What is the book value of the asset before the disposal?
What is the book value of the asset before the disposal?
What is the total amount of the loss on disposal of the asset?
What is the total amount of the loss on disposal of the asset?
How many computers were sold by the company in 2014?
How many computers were sold by the company in 2014?
What is the selling price of each computer?
What is the selling price of each computer?
What is the cost of each computer sold?
What is the cost of each computer sold?
What percentage of computers sold are expected to be returned for warranty work?
What percentage of computers sold are expected to be returned for warranty work?
What is the average cost of warranty work per computer?
What is the average cost of warranty work per computer?
What is the actual amount spent on warranty work in 2015?
What is the actual amount spent on warranty work in 2015?
What is the amount of the estimated warranty liability recorded at the end of 2014?
What is the amount of the estimated warranty liability recorded at the end of 2014?
What is the amount of the actual warranty expense incurred in 2015?
What is the amount of the actual warranty expense incurred in 2015?
What is the value of the merchandise purchased on credit by the business?
What is the value of the merchandise purchased on credit by the business?
What is the sales value of merchandise sold on credit?
What is the sales value of merchandise sold on credit?
What is the cost of the merchandise sold on credit?
What is the cost of the merchandise sold on credit?
What is the amount of GST remitted to the government for January transactions?
What is the amount of GST remitted to the government for January transactions?
What is the amount of A's investment in the partnership?
What is the amount of A's investment in the partnership?
What is the amount of A's salary allowance?
What is the amount of A's salary allowance?
What is the total net income for the partnership?
What is the total net income for the partnership?
How much is allocated to A's capital account for the year?
How much is allocated to A's capital account for the year?
What percentage of the partnership is allocated to C?
What percentage of the partnership is allocated to C?
What is the total capital of the partnership before C joins?
What is the total capital of the partnership before C joins?
What is the total capital of the partnership after C joins?
What is the total capital of the partnership after C joins?
What is the amount of A's capital after admitting C?
What is the amount of A's capital after admitting C?
What is the amount of C's capital after being admitted?
What is the amount of C's capital after being admitted?
What is the total amount of capital allocated to A and B based on their profit-sharing ratio?
What is the total amount of capital allocated to A and B based on their profit-sharing ratio?
What is the amount of cash received by partner C upon leaving the partnership?
What is the amount of cash received by partner C upon leaving the partnership?
What is the amount of capital contributed by partner C when they join the partnership?
What is the amount of capital contributed by partner C when they join the partnership?
What is the original capital balance of partner C?
What is the original capital balance of partner C?
What is the amount credited to C's capital account?
What is the amount credited to C's capital account?
What is the difference in the amount of capital allocated to A and B after C leaves?
What is the difference in the amount of capital allocated to A and B after C leaves?
How much is credited to A's capital account?
How much is credited to A's capital account?
Flashcards
Cost of Capital Assets
Cost of Capital Assets
Expenses associated with acquiring and improving long-term assets.
Salvage Value
Salvage Value
Estimated residual value of an asset at the end of its useful life.
Straight-Line Depreciation
Straight-Line Depreciation
Method of depreciating an asset evenly over its useful life.
Double-Declining Balance
Double-Declining Balance
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Units of Production Method
Units of Production Method
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Capital Asset Disposal
Capital Asset Disposal
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Estimated Warranty Liability
Estimated Warranty Liability
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Net Income Allocation
Net Income Allocation
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Admission of a New Partner
Admission of a New Partner
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Withdrawal of a Partner
Withdrawal of a Partner
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Land Improvements
Land Improvements
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Depreciation Expense
Depreciation Expense
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Accumulated Depreciation
Accumulated Depreciation
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Book Value
Book Value
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Cash Basis Accounting
Cash Basis Accounting
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Accrual Basis Accounting
Accrual Basis Accounting
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Interest on Investment
Interest on Investment
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Partnership Capital Accounts
Partnership Capital Accounts
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Equity!
Equity!
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Warranty Expense
Warranty Expense
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Land Usage Costs
Land Usage Costs
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Demolition Costs
Demolition Costs
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Renovation Costs
Renovation Costs
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Journal Entries
Journal Entries
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Machinery Capitalization
Machinery Capitalization
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Accumulated Depreciation Adjustment
Accumulated Depreciation Adjustment
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Loss on Asset Disposal
Loss on Asset Disposal
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Cost of Goods Sold
Cost of Goods Sold
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Estimated Warranty Liability Recognition
Estimated Warranty Liability Recognition
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Study Notes
Cost of Capital Assets and Recording Costs of Real Estate
- ABC Holdings purchased land and three buildings for $1,200,000 on March 1, 2024.
- An appraisal valued the land at $750,000, Building 1 at $250,000, and Building 2 at $0.
- Additional costs included: $20,000 for land clean-up and leveling, $5,000 for building 1 renovations, $12,000 for building 1 renovations, and $5,000 for parking lot construction.
- ABC received $2,000 in salvage from fixtures in Building 2.
Depreciation
- A vehicle was purchased for $42,500 on July 1, 2014.
- Expected useful life is 4 years or 100,000 km.
- Expected salvage value is $2,500.
- In 2014, the vehicle was driven 20,000 km.
- In 2015, the vehicle was driven 25,000 km.
- Depreciation methods used were: straight-line, double-declining balance, and units of production.
Revised Depreciation
- A machine cost $50,000 with a $5,000 salvage value and a 5-year useful life.
- In year 4, a module was added, increasing usefulness and life to 8 years.
- The cost of the module was $10,000, and the salvage value decreased to $3,000.
- Depreciation expense was calculated for year 4.
Disposal of Capital Asset
- An asset was disposed of with a cost of $100,000.
- Accumulated depreciation to the date of disposal was $75,000.
- Proceeds from the disposal were $20,000.
- Journal entries were prepared for the disposal.
Estimated Warranty Liability
- In 2014, 200 computers were sold at $1,000 each with a $700 cost.
- Estimated warranty work is 10% of sales.
- The average cost of warranty work is $200 (parts and labor).
- In 2015, $1,550 was spent on warranty work (850 labor).
- All journal entries were prepared.
GST (Goods and Services Tax)
- Merchandise was purchased for $1,000 on credit on January 4.
- Merchandise was sold on credit for $500 (sales value) and $250 (cost) on January 7.
- Payment for the January 4 purchase was made on January 15.
- Payment was received for the January 7 transaction on February 1.
- GST was remitted to the government on February 28.
- Journal entries (with 5% GST) were prepared.
Partnership & Net Income
- A partnership was formed with A investing $100,000 and B investing $50,000.
- Their agreement for profit allocation is as follows;
- A's salary allowance: $40,000.
- B's salary allowance: $30,000.
- 10% interest on investment.
- Remaining profit will be split equally.
- Net income was $50,000.
- Journal entries to allocate net income were prepared.
Withdrawal of Partner
- A partnership existed with A, B, and C who had capital balances of $100,000, $200,000, and $300,000 respectively.
- C withdrew, receiving $220,000 cash in full payment.
- The partnership agreement indicated equal profit sharing between the partners.
- Journal entries to record the payment to C were prepared.
Admission of New Partner
- A partnership existed where the partners' agreed capital contribution was as follows; A = $60,000; B = $40,000; C = $60,000.
- C was to become a 25% interest partner with the contributed capital from C is $60,000
- Journal entries for admission of C were prepared.
Extra Theory Tips
- PPE (Property, Plant, and Equipment): Tangible assets with a useful life longer than one accounting period.
- Capital Expenditures: Costs that increase the asset's value or useful life.
- Revenue Expenditures: Costs that do not increase the asset's value or useful life.
- Depreciation: Allocation of an asset's cost over its useful life.
- Intangible Assets: Non-physical assets with economic value.
- Current Liabilities: Obligations due within a year.
- Contingency Liabilities: Potential obligations dependent on future events.
- Partnerships: Unincorporated businesses with multiple owners.
- Partnership Agreement: An agreement outlining partnership terms.
- Mutual Agency: Partners can bind the partnership to contracts.
- Capital Deficiency: A partner with a negative capital balance.
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