#1) Depreciation XYZ Corporation purchased a new computer server
for $78,000 from Dell. Dell added 7% sales taxes and shipping costs
of $2,000. XYZ information technology employees spent 100 hours
installing and testing the new server. Average wages for XYZ
information technology employees are $50 per hour. XYZ estimates
the server has a useful life of 4 years and $5,000 residual value.
XYZ uses double-declining balance deprecation method for computer
equipment. The server was placed in service on April 1, 2014. XYZ
fiscal year ends on December 31.
What is recorded as computer asset?
What is the depreciation expense for 2014?
#2) ABC Company develops cures for cancer. A. ABC spent $1,000,000
developing a cure for pancreatic cancer. They submitted a patent
application that costs $30,000 to prepare and $10,000 filing fees.
B. ABC acquired patents from Komen Corp for possible cures for
breast cancer. ABC paid $500,000 for these patents. After acquiring
the patents, ABC spent $250,000 to further advance the cure for
breast cancer. C. ABC successfully defended a patent infringement
lawsuit against its brain cancer drug patents. ABC spent $60,000 in
legal fees on the lawsuit.
What is recorded in the Patent long-term asset account?
What is recorded in R&D and other expense accounts?
Depreciation:
( 1) What is recorded as computer asset?
| Cost | $ 78000 |
| Sales Tax ( $78000 * 7%) | $5460 |
| Shipping Cost | $2000 |
| Installing cost ( 100hour *$50 per hour) | $5000 |
| Total cost of computer | $90,460 |
2) What is the depreciation expense for 2014?
Explanation:
1) Dep .Rate:
= 1/ useful life *2 *100
= 1/4 × 2 ×100
= 50%
2) Dep. for 2014
= $ 90,460 × 50% × 9/12
= $ 33,922.5
3) For ,2014 dep exp is calculated for 9 months i.e. Apr to Dec.
Answer 2)
Patent long-term asset account is 600,000
R&D and other expense accounts is 1,250,000
Patent: 30,000 (prepare application) + 10,000 (filing) + 500,000 (acquire) + 60,000(legal) = 600,000
R&D: 1,000,000 (develop pancreatic) + 250,000 (further develop) = 1,250,000
Get Answers For Free
Most questions answered within 1 hours.