Problem: Comprehensive problem on amortization of long lived assets
On 1st January 2006, Maple Leaf Corporation reported the following property, plant, equipments and other intangible assets.
|
Assets
|
Cost
|
Estimated life
|
Salvage value
|
Accumulated amortization
|
|
Land
|
4500000
|
N.A.
|
Nil
|
|
|
Building
|
6000000
|
40 years
|
Nil
|
3300000
|
|
Equipment
|
2000000
|
10 years
|
Nil
|
1250000
|
|
Goodwill
|
370000
|
N.A.
|
Nil
|
|
During 2006 following transactions occurred.
|
Date
|
Transactions
|
Amount
|
|
April 1
|
Sold equipment that cost $500,000 when purchased on Jan 1 1998
|
160000
|
|
May 1
|
Purchased land for 2460,000 and legal charges for registration of title deeds paid $40000
|
2500000
|
|
Aug 1
|
Sold land for 1400,000, Received $540,000 cash and a five year 6% Note payable for the balance. The land cost $600000
|
1400000
|
|
July 1
|
Purchased equipment for cash
|
1500000
|
|
Dec 31
|
Retired equipment that cost $400000 when purchased
|
Instructions:
Problem 1. Calculate amount of amortization expense for 2006 in respect of each asset given above and impairment loss in respect of Goodwill.
Problem 2. Record journal entries for the above transactions
Problem 3. Record adjusting entries at Dec 31 2006.
Problem 4. Prepare Property, plant and equipment section of the partial Balance sheet at December 31 2006..