90.2K

Verified Solution

Link Copied!

L Fixtures Incorporated (LFI) is a manufacturer of exercise equipment such as treadmills, stair climbers, and elliptical machines. The company has a December 31 year end and uses ASPE. The accounting staff member who normally looks after the capital asset accounts was on maternity leave for the year, and the company put all transactions in a temporary account called Asset Additions and Disposals. The company policy on calculating depreciation for partial periods of ownership is to take 50% of the normal amount of depreciation in the year of addition or disposal. Due to the staff member's maternity leave, no depreciation or amortization expense has yet been taken in 2023. 1. The company completed construction of a new plant in Saskatchewan on December 15, 2023, to help it better meet the needs of its customers west of Ontario. The costs associated with this construction project were as follows: Land Construction contract: building, 20 years of useful life, residual value of $44,000 Equipment Furniture Training costs (employees learning to use equipment) Avoidable interest calculated at 8% on financing of construction project from inception until put in use $440,000 1,320,000 (See below) 220.000 39,600 66,000

The equipment purchased for the new plant was bought on a deferred payment contract signed on December 1. LFl issued a $4-million, five-year, non-interest-bearing note payable to the equipment supplier at a time when the annual market rate of interest was 5%. The note will be repaid with five equal payments made on December 1 of each year, beginning in 2024. LFI purchased a used computer and a printer at an auction for $2,200. The printer needed a new drum. The cost of the new drum was $440. The used computer's fair market value was $1,760 if purchased separately. The printer was worth $880 without a drum and $1,320 with the drum replaced. On July 1, 2023, LFI sold a delivery truck for $8,800. The truck originally cost $22,000, and accumulated depreciation on the truck to December 31, 2022, was $8,800. The truck was amortized on a straight-line basis over a five-year period, with no residual value. The sale was recorded as a debit to Cash and a credit to Asset Additions and Disposals. No depreciation was recorded in the current year. Due to an office redesign in the Ontario building, LF| traded some old equipment for different equipment with a similar life and value in use. The fair value of the equipment disposed of was $4,400. The cost of this equipment was $6,160, and the accumulated depreciation on the equipment at December 31, 2022, was $2,640. This transaction was not recorded in the books of account. No entry was made to record the exchange 5. Shortly after the new factory was completed, vandals attacked the building and caused significant damage. The costs to correct the damage, which were not covered by insurance, included: New paint to cover graffiti Glass for broken windows Improved security system $3.520 8.800 22,000 6. 7. During the year, the company developed a new piece of exercise equipment that has a built-in video game. It was the policy to amortize development costs on a straight-line basis over three years, with 50% of the normal amount in the year of development. The costs associated with product development included: Costs to determine how a video game would work with exercise equipment $44.000 Design, testing, and construction of prototype equipment 308,000 Costs to determine the best production process for the new equipment 35.200 Advertising costs to alert customers about the new product 41.360 The company has goodwill and an intangible asset as follows: Asset Details Original Cost as at December 31, 2022 Accumulated Amortization as at December 31, 2022 Amortization Method Goodwill Recorded in 2018 when the company took over the business of its predecessor $440,000 $0 Not applicable

7. The company has goodwill and an intangible asset as follows:

Asset Goodwill Customer list Details Recorded in 2018 when the company took over the business of its predecessor Purchased in 2018 when the company took over the business of its predecessor Original Cost as at December 31, 2022 $440.000 $220,000 41,360 Accumulated Amortization as at December 31, 2022 $0 $99,000 Amortization Method Not applicable Straight-line over 10 years The customer list has lost value and will not provide benefits through to 2028, as was originally predicted. It is now expected to provide undiscounted future cash flows of $44,000 in total over the next two years. There are no estimated costs to sell the list, as it will not be sold, and the value in use is $40,480. Goodwill has a recoverable value of $616,000 as at December 31, 2023.

Delivery truck disposition Account for the disposition of the delivery truck by preparing a journal entry in good form. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,275. List all debit entries before credit entries.)

Account Titles and Explanation Debit. Credit

Answer & Explanation Solved by verified expert

See Answer