HW2 Long term Assets Answers 2 
ACTG 351
HW #2 (Long-term Assets)
1. At January 1, the balances in Equipment and Accumulated Depreciation were $1,021,500 and
$189,900, respectively. At December 31 after adjusting entries, the balances were $1,125,900 and
$452,700, respectively. During the year, $148,500 of equipment was acquired and equipment with a book value of $25,200 was sold. What was Depreciation Expense for the year?
Equipment
1,021,500
148,500
1,125,900
Plug A
Accumulated Depreciation
189,900
Plug B
Dep Exp
452,700
Plug A = 44,100 = Cost of Asset Sold
BV of Asset Sold = Cost of Asset Sold – A/D of Asset Sold
25,200 = 44,100 – A/D of Asset Sold
A/D of Asset Sold = 18,900 = Plug B
Then solve for Depreciation Expense = $281,700
2. On March 4, 2013 Nothing On TV Corp purchased a television studio, which included land, a building, parking lot, furniture, camera and recording equipment. They paid $2.3 million for all the items. The fair value for each group of items is listed below. Payment terms require NOTV to pay
$300,000 on March 4, with $1 million payable each year on March 4 for 2014 and 2015. NOTV could have taken out a loan from the bank at 7 percent interest to pay for the studio.
Asset
Fair Value
% of Total
Land
$500,000
20.83%
Building
$1,400,000
58.33%
Parking Lot
$100,000
4.17%
Furniture
$50,000
2.08%
Equipment
$350,000
14.58%
$2,400,000
Record the purchase of the television studio on March 4, 2011.
Present Value of 2.3 million = 2,108,020 = 300,000 + 1,000,000 * 1.80802
Discount on Note = $191,980 = 2,000,000 – 1,808,020
Allocation to the Assets based on Percentage of Total Fair Value above. Journal Entry is:
Land
439,171
Building
1,229,678
Parking Lot
87,834
Furniture
43,917
Equipment
307,420
Discount on N/P
191,980
Cash
300,000
Note Payable
2,000,000
3. Exxon Mobile has asset retirement obligations in connection with drilling activities and chemical production. Go to the following 10-K filing and answer the following questions:
HW #2 (Long-term Assets)
1. At January 1, the balances in Equipment and Accumulated Depreciation were $1,021,500 and
$189,900, respectively. At December 31 after adjusting entries, the balances were $1,125,900 and
$452,700, respectively. During the year, $148,500 of equipment was acquired and equipment with a book value of $25,200 was sold. What was Depreciation Expense for the year?
Equipment
1,021,500
148,500
1,125,900
Plug A
Accumulated Depreciation
189,900
Plug B
Dep Exp
452,700
Plug A = 44,100 = Cost of Asset Sold
BV of Asset Sold = Cost of Asset Sold – A/D of Asset Sold
25,200 = 44,100 – A/D of Asset Sold
A/D of Asset Sold = 18,900 = Plug B
Then solve for Depreciation Expense = $281,700
2. On March 4, 2013 Nothing On TV Corp purchased a television studio, which included land, a building, parking lot, furniture, camera and recording equipment. They paid $2.3 million for all the items. The fair value for each group of items is listed below. Payment terms require NOTV to pay
$300,000 on March 4, with $1 million payable each year on March 4 for 2014 and 2015. NOTV could have taken out a loan from the bank at 7 percent interest to pay for the studio.
Asset
Fair Value
% of Total
Land
$500,000
20.83%
Building
$1,400,000
58.33%
Parking Lot
$100,000
4.17%
Furniture
$50,000
2.08%
Equipment
$350,000
14.58%
$2,400,000
Record the purchase of the television studio on March 4, 2011.
Present Value of 2.3 million = 2,108,020 = 300,000 + 1,000,000 * 1.80802
Discount on Note = $191,980 = 2,000,000 – 1,808,020
Allocation to the Assets based on Percentage of Total Fair Value above. Journal Entry is:
Land
439,171
Building
1,229,678
Parking Lot
87,834
Furniture
43,917
Equipment
307,420
Discount on N/P
191,980
Cash
300,000
Note Payable
2,000,000
3. Exxon Mobile has asset retirement obligations in connection with drilling activities and chemical production. Go to the following 10-K filing and answer the following questions: