Solutions.W10.Final

Solutions.W10.Final - 1 Concordia University Department of...

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Concordia University Financial Accounting Department of Accountancy COMM 217 All Sections Suggested Solution Final Examination Winter 2010 Question 1 (24 marks) Multiple-choice (1.5 marks per correct answer) 1. d 2. a 3. d 4. c 5. d 6. b 7. d 8. b 9. c 10. b 11. c 12. c 13. c 14. a 15. b 16. c 1
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Question 2 (20 marks) Allocation of the lump sum (3 marks) Note: The interest cost is not added to the acquisition costs of the assets (not capitalized). Instead it is recorded as an expense on December, 31. Appraised values: Land $225,000 225,000/450,000 = 50% 50% x 420,000 = $210,000 Building 180,000 180,000/450,000 = 40% 40% x 420,000 = 168,000 Equipment (machine) 45,000 45,000/450,000 = 10% 10% x 420,000 = 42,000 Total $450,000 100% $420,000 July 1, 2009 (4 marks) Dr. Cr. Land 210,000 Building 168,000 Equipment (42,000 + 3,000 ) 45,000 Note payable 420,000 Cash 3,000 October 1, 2009: Disposal of the destroyed asset (warehouse): (6 marks) Amortization expense up to the date of the disposal (9 months): (150,000 – 10,000) / 10 years x 9/12 = 10,500 Net book value at disposal date = Cost – Accumulated Amortization = 150,000 – (84,000 + 10,500) = 55,500 Cash received (proceeds) for the insurance company = $55,500 no gain or loss to record Entries: October 1, 2009 Dr. Cr. Amortization expense 10,500 Accumulated amortization (warehouse) 10,500 Cash 55,500 Accumulated amortization (84,000 +10,500) 94,500 Building 150,000 Payment of interest on the note payable : (1 mark) December 31, 2009: Dr. Cr. Interest expense
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Solutions.W10.Final - 1 Concordia University Department of...

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