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ACCT 2220 Lecture Notes - Lecture 9: Intangible Asset, Book Value, Income Tax

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School
University of Guelph
Department
Accounting
Course
ACCT 2220
Professor
Louise Hayes

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Document Summary

Learning objectives: determine the cost of property, plant and equipment, explain and calculate depreciation, account for the depreciation of property, plant and equipment. 5: describe the methods for evaluating the use of assets. Identify the basic accounting issues for intangible assets and goodwill. Illustrate how long-lived assets are reported in the financial statements. Are used in the operation of a business. Are not intended for sale to customers. Determining the cost of property, plant and equipment. Purchase price, including non-refundable taxes and duties, less discounts or rebates. Expenditures necessary to bring asset to its intended location and make it ready for its intended use. Estimated cost of future obligations to dismantle, remove, or restore the asset at the end of its useful life. Closing costs such as title and legal feeds. Additional costs to prepare land for its intended use (less any proceeds from salvage) Land has unlimited life, therefore it is not depreciated.

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Related Questions

Your answer is partially correct. Try again.

Presented below is the balance sheet of Sargent Corporation forthe current year, 2014.

SARGENT CORPORATION
BALANCE SHEET
DECEMBER 31, 2014

Current assets $ 487,300 Current liabilities $ 382,300
Investments 642,300 Long-term liabilities 1,002,300
Property, plant, and equipment 1,722,300 Stockholders’ equity 1,772,300
Intangible assets 305,000 $3,156,900
$3,156,900


The following information is presented.

1. The current assets section includes cash $152,300, accountsreceivable $172,300 less $12,300 for allowance for doubtfulaccounts, inventories $182,300, and unearned rent revenue $7,300.Inventory is stated on the lower-of-FIFO-cost-or-market.
2. The investments section includes the cash surrender value of alife insurance contract $42,300; investments in common stock,short-term (trading) $82,300 and long-term (available-for-sale)$272,300; and bond sinking fund $245,400. The cost and fair valueof investments in common stock are the same.
3. Property, plant, and equipment includes buildings $1,042,300less accumulated depreciation $362,300; equipment $452,300 lessaccumulated depreciation $182,300; land $502,300; and land held forfuture use $270,000.
4. Intangible assets include a franchise $167,300; goodwill$102,300; and discount on bonds payable $35,400.
5. Current liabilities include accounts payable $142,300; notespayable-short-term $82,300 and long-term $122,300; and income taxespayable $35,400.
6. Long-term liabilities are composed solely of 8% bonds payabledue 2022.
7. Stockholders’ equity has preferred stock, no par value,authorized 200,000 shares, issued 72,300 shares for $433,800; andcommon stock, $1.00 par value, authorized 400,000 shares, issued102,300 shares at an average price of $10. In addition, thecorporation has retained earnings of $315,500.


Prepare a balance sheet in good form, adjusting the amounts in eachbalance sheet classification as affected by the information givenabove. (List Current Assets in order of liquidity. ListProperty, Plant and Equipment in order of Land, Building andEquipment. Enter account name only and do not provide thedescriptive information provided in thequestion.)

Presented below is the balance sheet of Sargent Corporation forthe current year, 2014.

SARGENT CORPORATION
BALANCE SHEET
DECEMBER 31, 2014

Current assets $ 488,120 Current liabilities $ 383,120
Investments 643,120 Long-term liabilities 1,003,120
Property, plant, and equipment 1,723,120 Stockholders’ equity 1,773,120
Intangible assets 305,000 $3,159,360
$3,159,360


The following information is presented.

1. The current assets section includes cash $153,120, accountsreceivable $173,120 less $13,120 for allowance for doubtfulaccounts, inventories $183,120, and unearned rent revenue $8,120.Inventory is stated on the lower-of-FIFO-cost-or-market.
2. The investments section includes the cash surrender value of alife insurance contract $43,120; investments in common stock,short-term (trading) $83,120 and long-term (available-for-sale)$273,120; and bond sinking fund $243,760. The cost and fair valueof investments in common stock are the same.
3. Property, plant, and equipment includes buildings $1,043,120less accumulated depreciation $363,120; equipment $453,120 lessaccumulated depreciation $183,120; land $503,120; and land held forfuture use $270,000.
4. Intangible assets include a franchise $168,120; goodwill$103,120; and discount on bonds payable $33,760.
5. Current liabilities include accounts payable $143,120; notespayable-short-term $83,120 and long-term $123,120; and income taxespayable $33,760.
6. Long-term liabilities are composed solely of 8% bonds payabledue 2022.
7. Stockholders’ equity has preferred stock, no par value,authorized 200,000 shares, issued 73,120 shares for $438,720; andcommon stock, $1.00 par value, authorized 400,000 shares, issued103,120 shares at an average price of $10. In addition, thecorporation has retained earnings of $303,200.


Prepare a balance sheet in good form, adjusting the amounts in eachbalance sheet classification as affected by the information givenabove. (List Current Assets in order of liquidity. ListProperty, Plant and Equipment in order of Land, Building andEquipment. Enter account name only and do not provide thedescriptive information provided in thequestion.)

The comparative statements of financial position of Mikos Inc. as at December 31, 2017 and 2018, and its statement of earnings for the year ended December 31, 2018, are presented below:

MIKOS INC.
Comparative Statements of Financial Position
December 31
2018 2017
Assets
Cash $ 10,600 $ 18,600
Short-term investments 72,200 40,800
Accounts receivable 76,000 32,400
Inventories, at cost 57,200 41,600
Prepaid expenses 5,600 9,200
Land 51,400 78,000
Property, plant, and equipment, net 286,400 187,000
Intangible assets 25,600 31,200
$ 585,000 $ 438,800
Liabilities and Shareholders’ Equity
Accounts payable $ 18,600 $ 43,200
Income tax payable 9,200 2,600
Accrued liabilities 11,600 -0-
Long-term notes payable 126,000 182,000
Contributed capital 232,000 68,000
Retained earnings 187,600 143,000
$ 585,000 $ 438,800
MIKOS INC.
Statement of Earnings
For the Year Ended December 31, 2018
Sales $ 898,000
Cost of sales $ 446,000
Amortization expense—intangible assets 5,600
Depreciation expense—property, plant, and equipment 34,600
Operating expenses 237,000
Interest expense 13,600 736,800
Earnings before income taxes 161,200
Income tax expense 48,360
Net earnings $ 112,840
Additional information is as follows:
a. Land was sold for cash at its carrying amount.
b. The short-term investments will mature in February 2019.
c. Cash dividends were declared and paid in 2018.
d. New equipment with a cost of $167,600 was purchased for cash, and old equipment was sold at its carrying amount.
e. Long-term notes of $18,000 were paid in cash, and notes of $38,000 were converted to shares.
1. Prepare a statement of cash flows for Mikos Inc. for the year ended December 31, 2018 by using the indirect method. (Negative answers should be indicated by a minus sign.)