mid2wkw98

mid2wkw98 - . Sander VibroblemlI (20 mins) Oceanwide...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 10
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 12
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: . Sander VibroblemlI (20 mins) Oceanwide Enterprises, Inc., is involved in operating cruise ships. At the end of 1993, Oceanwide correctly reported $5,400,000 as Construction in Progress on the following jobs: Accumulated Costs Completion Date (including 1993 interest) Shin iiiamdsziJmnnfln__. ____Decemben_311_1223____ #340 October 31, 1993* $2,300,000 ” #341 June 30, 1994 1,150,000 #342 September 30,1994 1,200,000 #343 January 31, 1995 ___159¢QQQ 5,400,000 * Ship #340 was completed and ready for use in October, 1993 and will be placed in service May 1, 1994 due to lack of demand. Labor, Material, and overhead costs for 1994 were as follows: #341 $1,200,000 January 31, 1994 #342 1,600,000 March 1, 1994 #343 2,200,000 April 1, 1994 #344 810,000 May 1, 1994 #345 (“860,000 construction began Nov. 1, 1994 Oceanwidewhad the following general liabilities_guring 1994: ‘12%, 5—year note (maturity date - 1996)..... . . . . . . ..$8,000,000. 110%, 10—year bonds (maturity date — 1998) . . . . . . . . . . ..4,000,000 On January 1, 1994, Oceanwide borrowed $1,000,000 specifically for the construction projects. The loan was for 3 years with interest at 13%. ' Instructions: Compute the total amount of interest Oceanwide can capitalize regarding these ship building activities in 1994; (Hint: In your weighted average accumulated expenditures calculation treat each ship separately.) (A) (g) Theoretically justify your treatment of the interest in this prOblem. Economics 1363 Midterm #2 4 4 4 T : ‘ .,. fimlmmm-qwmw—F“mvmmmv~ n...“ . PROBLEM II (15 mins) The followinqxselected events occurred during 1989. Jan. 10 Jan. 25 Feb. 1 Feb. 15 A motor breaks on a machine and is replaced for $800. This replacement was expected when the machine was purchased but no separate identification of the book value or separate depreciation of the old motor was available. A machine that was purchased for $10,000 and has a book value of $1,000 is sold for $400. A fully depreciated building that originally cost $25,000 is demolished so that a new building may be constructed. The demolition cost $2,200 and resulted in $500 of salvageable materials. A machine breaks down unexpectedly and requires repairs of ,fs7oo. March 10 March;18 March 27 Remixed An uninsured accident damages some equipment. Major ‘repairs coSt $2,000. A motor breaks on a machine and is replaced for $900. The new motor is_df an improved design that increases the capaCity of the machine. A separate identification of the old motor is available. Its original cost was $600 and it was 50% depreciated. OffiCe layout is rearranged at a cost of $700. At the same time the walls are repainted for $300. The rearrangement was to make room for one more employee and the repainting is because of dirt that has accumulated over the years. Prepare journal entries for the above transactions and briefly indicate the theoretical reasons for your treatment. PROBLEM I I I (15 mins) The Brush Company engaged in the following transactions at the beginning of 1989: 1. Purchased a patent for $70,000 that had originally been issued in January, 1983. The purchase was made to protect another patent that the company had received in January, 1986. 'Assume the product protected by these patents will last 20 years from January, 1989. Purchased the rights tola novel by a best-selling novelist in exchange for 10,000 shares of $10 par value common stock selling for $60 per share. The book sells 1 million copies in 1989 and is expected to sell a total of 500,000 copies in future years. Purchased the franchise to operate a ferry service from the state government for $10,000. A bridge has been planned to replace the ferry, and it is expected that it will be completed in 5 years. Brush hopes that the ferry will continue as a tourist attraction, but profits are expected to be only 20% of those earned before the bridge is opened and continue for 5 additional years. Paid $18,000 of legal costs to successfully defend the patent acquired in transaction 1. Paid a racing driver $50,000 to have the Brush Company name prominently displayed on his car for 2 years. Paid $10,000 for TV commercial that management thought would impact buyer's decisions for 10 years. assumed Prepare journal entries to record the above transactions, including the first year’s amortization of intangible assets where appropriate. Explain why you used the life you did. PROBLEM IV (15 mine) The Bremer Company made the following exchanges of assets during 1989: 1. Acquired a machine worth $10,000 by paying $2,000 cash and giving a similar machine that had originally cost $40,000 and has a book value of $15,000. 2. Acquired a building worth $55,000 by paying $5,000 cash and giving a piece of land that had originally cost $30,000. 3. Acquired a machine worth $20,000 by paying $5,000 cash and giving a similar machine that had originally cost $13,000 and has a book value of $11,000. a 4. Acquired an automobile with a list price of $6,000. The company traded in an old automobile that had originally cost $7,000, has a book value of $5,000, and has a "blue book" value of $6,800;*.In addition the company received $800 cash. ‘ Mined Prepare journal entries for the Bremer Company. Assume in each case that the other company is giving up a new undepreciated asset. PROBLEM V (10 mins) The Kam Company purchased a machine on March 1, 1989, for $20,000. The machine had an expected life of 4 years and a residual value of $300. The double-declining-balance method of depreciation is used. Mixed Compute depreciation for each year of the asset's life — A. assuming that the company has a policy of always changing to the straight-line method at the latest point of the asset's life. B. assuming that the company always changes tothe straight—line method at the beginning of the year when it is most theoretically sound under the double declining balance concept of depreciation. V 7 ‘ Elba PROBLEM VI SHORT ANSWERS (30 mins) 1. Discuss what type of costs are considered research and development and theoretically justify the FASB's recommendation of how to treat these costs including those that have alternative uses. How does this affect the carring value of any related patent that comes from the research? 2. Describe what costs are included in the depletion base to be amortized. How are these costs usually amortized and why? Are all of these costs handled the same by all companies and if not why? 3. Give 2 sound theoretical reasons for using the accelerated methods of depreciation. Are there other reasons why this method is used which are not so theoretically sound? 4. Describe how changes in depreciation estimates are handled. And why? 5. Describe what an impairment of an asset is and how accountants treat them and why. 6. For each of the following methods of depreciation indicate an asset for which it would be appropriate to depreciate or deplete using the methods and why it is appropriate for that asset- A. straight line B. sum of years digits C. replacement D. MACRS (modified accelerated cost recovery system) — 7 year life [99/ wrlémfiué" Ampm‘t Auéudcme fir/almnvaa {L W i" 1 , 4 ‘> 5/“? 351cc?» 3/6uaa mr & ewe-16¢: fid— Mmuwfl'nuJfié‘w: IT 1 42k a-fi.t7£ gum. n /9¢~/ ' an ; p ' Mr»; I” 3” 4/520“: x’ (/8; —.. f \\ + .42qu x 6/; - 5MP 3Y1 Chew“ x : 7 '3 4603 a” >‘ I}, : {2?} S!!! 1 \ ' ’ 33/5 7mg )c ’1]; :_ \ 2’200’00“ )1. MM 354! 534/40 35’“ 360009 ) 3&4ng A13 56M£FI®fl r: Aztf (Se/Arc. 05%;”:fo «Did-M“: m" meww . a pawn M9 N g; a ‘ ,. I WSf' I‘Vch [J .8u3,y£{) 01:34”: . w” ‘63: 1”" Acaarur 7009 y 7a Ar$"‘a¢~§ Chfif 7.099 (.5: 9419,5550; Lu 1’ 3/]? mfizflftl: 900 $1 IIN q {5&56‘: a}; 1‘ FM (“.m’?¢d A g 300 N . / mittens“: éou 5%" Wis; (95; «.4 (431+ ' 9m, 3/ 7, 17 @4mgxyr 30" Swat Linear: f‘ 12% Mt a»... Mfl“_ 3: cram; tic-o5. 71,0 5 c w; I Iv ‘ “a . "‘ hfi'“ film. W: {$405.43 04: 1% how “'" M“ damn a 3117 / JP /' A7?” @70 000 Ann-Ar 5.? {new .~' I!) 0 (45/! 79900 CD Acc. (II-9n? 15159) // YgArz; 3.9.4“!ng fig? 5’3 fish: fun-:6 1" MILL Reamer C9 OWE 5"!” ’3’ 135:»9: 03714. f’arl-f afifilZF‘—\\ My” " . v _. 77‘ g'fl'b" “’VF ’/1 ('Arzarr @ F’” V ‘7 ’6 X ’bQ-W ‘5 éoauod I Adan:- a: (01974: #6; V ( fly. ’ L 7 000m W (3 i Caiullifflfémfin: 44.x“ Cod-mm /oumau (C X 5/ ) ) 1-090.) AP}: 53mm.) ‘_,__-:M H . 3 . I. ' (use) 2/3 MM“; aria”: $26“; \ \ [M I p w,“ ' 4 ( 6) F MPH-30: dictuCEI) ® Afloat?” 63 F4~¢5y 60%;,(3 /(‘7 om Iowa ' Z ( F‘Mfi’f: Ma?) /“7 I; «12:0 ' . 2 iflffmw fiewum M: own-rng (Mum: 6 I3;ngg 201“; g." = ,m w 65w“? :9 ' W m W) 4754‘”, IEO” , = Cl» (9 Earp. Ifouuf. 1'!) -53{ [Foam [*775‘17‘ (An. ) Q) S‘mz 4: / @kMonovfarijrr/é ‘3‘““9 VMr 5):? in . “U C»: ‘4 53"” C1? FRI/rm Adv M6644.— 29”” [F has“ 00 681"“ .49" 5-6“, a? My LT GWE?‘T)(OMKY 1"y5fi1; OF Gautmu ADA/Li‘le ) > . D podWfiub Ev? [Wu ('9) (no or (SEC/5);," dram) I009“ “ (if CP’(WQL 4' W31“ mm b YM.) ‘ ‘ ,V BE ' -_mm.m “mtmwwa ‘ . > w . ’ Wanna...“ m.- . .mlv «~.~-W:.£:_.AL.L.M. Llan J v ‘4 , . .V.‘ r »m‘n'v‘ ‘ vinJ'Jv‘mm‘auummmww mummy“.-. ...-_ .. . ‘ .7“ >..a.».n.....(¢;'....;‘....w. ‘ 4...". ... 6m 7 C58“ $.55 : Fnul ego : FAKMsJ-‘é (Ma Pam 9 in» ; loam +' Zuu'o ‘ :53 L, . FM” 5‘43 '— ?Ad6v£~)-chu.f’4m «a-.. ,7 fifths—5m n Shun» q ‘ .. . M 3 S15‘LMIV “L0 FMV L0) “‘v moG -. (9300 — so.» 93““ ‘1 (now + Gm. I 8333 V '2/ 2900069333. '1’ Hum <qx1: 5833 2900:9- (Luce: 5534+4Y2 = 2917 LG i") (4‘?! ES Law-- 17083 *-17:‘n'7 54x: : I463, 1%; (a. 9- Sw SL “’ lyégfioa : #63 5 Mt? Ya“ ‘ ,3“ vEr'ifi-n" Jim” 7 r . ,ug‘ma‘“ Mmm~gx_....m m. ...... _. » . .. a 89 , 's-r mum Mt WCMM/a Effan A Mum Pmiaa turn} era. o (I) 1"“ at m ‘ (W arr quaO—E mm: hum-cu 9mm) V mew Mare: edgy» 56%;! I‘mcrfr, (MN 8 ‘ Suki: c»? 1:041:44; @tFm, uurm mums 9mm awn» (Vi/1y ¢F1~su m 6mg“! Nisan") Afliilm“ /< 2 S ‘F A am ‘D—e; Mutt! “mac. (use; 17w» “MO'LT'IF— “WE-‘7- N Cams 1:31!» M (21m mflmsc: ovaTMML LAF’E. CAa/L‘rwa vmut Of “*5 0‘73“? F¢E§HLT IS 71/!“th “~0M55LU64 0mm:- ' . , ’ I. a how 0r TM a.“ m A PAT-z“: u N rum am: Why Mat. 8%., 6:05.13“ 12/ C/ ‘L L 2. 0 ACQHurnog (0575 o Esau)“; 3 (Len-Mm»; 02:33 I) sutcfi“ FOIL O'L'?CA1- u~fl¢¢fifll 7. . lua- fitdfin L an; F“ was: PATTM was: Ham; ‘7 a 2, “Etna “mug? lush K61 'oxuqfis‘ °& "~:OCL 'L ‘4) i~mc.em 0mm. Cm “‘ a“ 0?" SKI-Knit: .WW mecca.» Gm“. 'M‘ ' 7- uxunm Mohfc‘lm w.ch law vaflZfiAE.WOtWSE ‘ Dqu/“Q—Wfiii “45% “0*” “WW: H 60.30 rmrnwmswlfflfl {SENl-5 ,/7MM.Lm.-k%' 6W9 WW WW3 MWqu own: W PM 0053001 THEaRI“(flL Imam»: »>_@ kg$ET owe Ca MutLE- Baum-g- ,N kiwéitntfi- Du‘zm owv'c" M‘L'T" 5 («1% am... “Mix? (65) SAmE- break DUE 'm oflrourgma. @ @ 9?? Saw ‘Mfiuu’x’ £9575 tux-gm mu; momma ’ kg!) M'bfl‘rtp Tfiwfim‘) m 5,»; gr." Ans-17‘ .2an \ ~ X 0mm. (If/thus 9 5 edugw A115“ ES "9"! “1’ © CC) 3 {Axe/o l4) PqufiauJC Ly 0L no A Tb (70w o k0va %- Panama «95‘; “(<9 “JAM-$5 P’Y ‘DNLM {manhunt Ame»: at: {Bar , 0064. “M&.41% 44F; ‘ THIS IS on“? m! w ' L 9 {MIN— .5 mum ‘ N - v ~ GA 'R) @® \5—5 @ CD L NH Maw 3;, a?“ T'Bé) U . KMWLW \MPA.MM \3 M __.. 9M” 353:», 12. m wwwhczsm PM), 17% saws; 43 Has-av Ag: . . ,1 2.. 0:96.; 'quRR 6Mt1’u'; of" M figET-éa ’1. w a?! ‘3 m an"??? 4 “WI—.9" fissu- ‘a $955 DWWYEsrzos Wm;va 0315:. 7. 6; guru: Uéayf Din % 454a?“ MET" ‘3'?! “£92571; All-Cr}: 0A. uu¢uwd $FCA-ut {we cnrm 6:340 Mfl‘fiflwfl 6:53; :9 +£15.45; . " .V . r37: ? 4"." AMY o~C Hwy“; \> GUT 5““‘3 r‘ '7 t . - I. " V, "- ‘-- “a 4 Anni-‘1 437w 0;»:ng mid.“ ask raw-i fifl‘f’ piggy ,.- '7 m ., a. aw!“ WW7 W” ' v WELEWHU‘C QGkCl/fiaxngwi‘.‘ (3 WE; mm #:35.‘ “wivqg 2. \3 MEng PM~MM {Biskvfi M9 um as W W, Vfi:gj,i___°fl- fat/’WN r; Affirm/um 9m; #ng 4:: as“ max. 01L WW) 9’" {My}. ...
View Full Document

This note was uploaded on 01/31/2010 for the course ECON 136B taught by Professor Anderson during the Spring '08 term at UCSB.

Page1 / 12

mid2wkw98 - . Sander VibroblemlI (20 mins) Oceanwide...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online