Exercises E9-1, E9-7, E9-12, P9-7B

E9-1
(A)
The cost principle states that assets must be recorded at the cost at which they were acquired. Although plant assets can fluctuate in fair market value, their book value will remain consistent. Companies must compute the total deprecation of the asset and allocate it over the useful life of the asset.
(B)
1) $5000-Land
2) $200- Factory Equipment/ insurance
3) $850- Delivery Equipment
4) $17,500-Land Improvements
5) $250-Delivery Equipment
6) $8000- Factory Equipment
7) $900-Prepaid Insurance
8) $75-License Expense/Equipment
E9-7
(A)
1.
2011= $3,500
2012= $3,500

2.
2011= $4,200
2012= $3,336

3.
2011= $7,500
2012= $5,625

(B)
1.
Book Value 1/1/2011 $30,000
Less: Salvage Value $2,000
Depreciable Cost $28,000
Remaining Useful Life 8 years
Revised Annual Depreciation $3,500

Dec. 31 Depreciation Expense $3500 Accumulated Depreciation $3500 (To Record annual depreciation on truck)

2.
Brainiac Company
December 31, 2011
Balance Sheet

Property, plant, and equipment
Equipment $30,000
Less: Accumulated Depreciation $3,500
Net property, plant and equipment $26,500

E9-12

Adjusting Entry:

Dec. 31 Amortization Expense—Patent 12,000
Patents ($90,000 ÷ 5 X 8/12) 12,000

P9-7B

(A) Jan. 2 Cash $45,000 Patent $45,000 (To record lawyer fees)

July. 1 Cash $230,000 Research and development Expense $230,000 (To record R & D of new patent for Jan-July)

Sept. 1 Cash $125,000 Research and development Expense $125,000 (To record advertising for development patent)

Oct. 1 Cash $200,000 Copyright $200,000 (To record acquired Copyright)

(B)

Dec. 31 Amortization Expense-Patent $15,000