Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 25

Analyzing and Recording Long-Lived Asset Transactions with Partial-Year Depreciation
Palmer Cook Productions manages and operates two rock bands. The company entered into the following transactions during a recent year.

Required:
1. Analyze the accounting equation effects and record journal entries for each of the transactions.
TIP: Goodwill is recorded as the excess of the purchase price over the fair value of
individual assets.
2. For the tangible and intangible assets acquired in the preceding transactions, determine the amount of depreciation and amortization that Palmer Cook Productions should report for the quarter ended March 31. For convenience, the equipment and vehicle are depreciated the same way, using the straight-line method with a useful life of five years and no residual value. The building is depreciated using the double-declining-balance method, with a 10-year use-full life and residual value of $20,000.
TIP: Calculate depreciation from the acquisition date to the end of the quarter.
3. Prepare a journal entry to record the depreciation calculated in requirement 3.
4. What advice would you offer the company in anticipation of switching to IFRS in the future
TIP: Consider whether the vehicle and different types of equipment should be grouped together.