Question

QUESTION 1

1. Merle Company operates a skateboard repair shop near USC. Merle purchased this business on January 1, Year 1, at a cost of $28,000. [$ values in thousands for ease of expression.] This price included the land, building and equipment. Merle started operations on August 1, Year 1.

   The cost basis of the land was properly determined to be $12,000. The cost basis of the building and equipment were properly determined to be $11,000 and $5,000, respectively. Merle properly uses the double-declining balance depreciation method for the building and the units of activity method for the equipment in its financial accounting records. The estimated economic lives of the building and the equipment are 15 years and 4,000 repair jobs, respectively. The estimated salvage values of the building and the equipment are $6,000 and $2,000, respectively.

   Merle performed repair jobs in Years 1 through 4 as follows:

   Year 1: 100 jobs,

   Year 2: 300 jobs and

   Year 3: 400 jobs.

   On January 1, Year 4, before any depreciation was recorded for Year 4, Merle accepted a cash offer and sold the property for $33,000 that same day. The sale price of $33,000 was properly allocated to land, building and equipment, respectively, as follows: $14,500, $16,000 and $2,500.

   Assume all accounting for depreciation had been properly done in Years 1, 2 and 3.

   How much Gain should Merle recognize on the sale of the Land?

QUESTION 2

1. Merle Company operates a skateboard repair shop near USC.  Merle purchased this business on January 1, Year 1, at a cost of $28,000.  [$ values in thousands for ease of expression.]  This price included the land, building and equipment.  Merle started operations on August 1, Year 1.

   The cost basis of the land was properly determined to be $12,000. The cost basis of the building and equipment were properly determined to be $11,000 and $5,000, respectively. Merle properly uses the double-declining balance depreciation method for the building and the units of activity method for the equipment in its financial accounting records. The estimated economic lives of the building and the equipment are 15 years and 4,000 repair jobs, respectively. The estimated salvage values of the building and the equipment are $6,000 and $2,000, respectively.

   Merle performed repair jobs in Years 1 through 4 as follows:

   Year 1: 100 jobs,

   Year 2: 300 jobs and

   Year 3: 400 jobs.

   On January 1, Year 4, before any depreciation was recorded for Year 4, Merle accepted a cash offer and sold the property for $33,000 that same day. The sale price of $33,000 was properly allocated to land, building and equipment, respectively, as follows: $14,500, $16,000 and $2,500.

   Assume all accounting for depreciation had been properly done in Years 1, 2 and 3.

   How much Loss should Merle recognize from the sale of the Land?

QUESTION 3

1. Merle Company operates a skateboard repair shop near USC.  Merle purchased this business on January 1, Year 1, at a cost of $28,000.  [$ values in thousands for ease of expression.]  This price included the land, building and equipment.  Merle started operations on August 1, Year 1.

   The cost basis of the land was properly determined to be $12,000. The cost basis of the building and equipment were properly determined to be $11,000 and $5,000, respectively. Merle properly uses the double-declining balance depreciation method for the building and the units of activity method for the equipment in its financial accounting records. The estimated economic lives of the building and the equipment are 15 years and 4,000 repair jobs, respectively. The estimated salvage values of the building and the equipment are $6,000 and $2,000, respectively.

   Merle performed repair jobs in Years 1 through 4 as follows:

   Year 1: 100 jobs,

   Year 2: 300 jobs and

   Year 3: 400 jobs.

   On January 1, Year 4, before any depreciation was recorded for Year 4, Merle accepted a cash offer and sold the property for $33,000 that same day. The sale price of $33,000 was properly allocated to land, building and equipment, respectively, as follows: $14,500, $16,000 and $2,500.

   Assume all accounting for depreciation had been properly done in Years 1, 2 and 3.

   How much Gain should Merle recognize on the sale of the Building: _______

QUESTION 4

1. Merle Company operates a skateboard repair shop near USC.  Merle purchased this business on January 1, Year 1, at a cost of $28,000.  [$ values in thousands for ease of expression.]  This price included the land, building and equipment.  Merle started operations on August 1, Year 1.

   The cost basis of the land was properly determined to be $12,000.  The cost basis of the building and equipment were properly determined to be $11,000 and $5,000, respectively.  Merle properly uses the double-declining balance depreciation method for the building and the units of activity method for the equipment in its financial accounting records.  The estimated economic lives of the building and the equipment are 15 years and 4,000 repair jobs, respectively.  The estimated salvage values of the building and the equipment are $6,000 and $2,000, respectively.

   Merle performed repair jobs in Years 1 through 4 as follows:

   Year 1: 100 jobs,

   Year 2: 300 jobs and

   Year 3: 400 jobs.

   On January 1, Year 4, before any depreciation was recorded for Year 4, Merle accepted a cash offer and sold the property for $33,000 that same day.  The sale price of $33,000 was properly allocated to land, building and equipment, respectively, as follows:  $14,500, $16,000 and $2,500.

   Assume all accounting for depreciation had been properly done in Years 1, 2 and 3.

   How much Loss should Merle recognize on the sale of the Building? _______

QUESTION 5

1. Merle Company operates a skateboard repair shop near USC.  Merle purchased this business on January 1, Year 1, at a cost of $28,000.  [$ values in thousands for ease of expression.]  This price included the land, building and equipment.  Merle started operations on August 1, Year 1.

   The cost basis of the land was properly determined to be $12,000.  The cost basis of the building and equipment were properly determined to be $11,000 and $5,000, respectively.  Merle properly uses the double-declining balance depreciation method for the building and the units of activity method for the equipment in its financial accounting records.  The estimated economic lives of the building and the equipment are 15 years and 4,000 repair jobs, respectively.  The estimated salvage values of the building and the equipment are $6,000 and $2,000, respectively.

   Merle performed repair jobs in Years 1 through 4 as follows:

   Year 1: 100 jobs,

   Year 2: 300 jobs and

   Year 3: 400 jobs.

   On January 1, Year 4, before any depreciation was recorded for Year 4, Merle accepted a cash offer and sold the property for $33,000 that same day.  The sale price of $33,000 was properly allocated to land, building and equipment, respectively, as follows:  $14,500, $16,000 and $2,500.

   Assume all accounting for depreciation had been properly done in Years 1, 2 and 3.

   How much Gain should Merle recognize on the sale of this Equipment? ________

QUESTION 6

1. Merle Company operates a skateboard repair shop near USC.  Merle purchased this business on January 1, Year 1, at a cost of $28,000.  [$ values in thousands for ease of expression.]  This price included the land, building and equipment.  Merle started operations on August 1, Year 1.

   The cost basis of the land was properly determined to be $12,000.  The cost basis of the building and equipment were properly determined to be $11,000 and $5,000, respectively.  Merle properly uses the double-declining balance depreciation method for the building and the units of activity method for the equipment in its financial accounting records.  The estimated economic lives of the building and the equipment are 15 years and 4,000 repair jobs, respectively.  The estimated salvage values of the building and the equipment are $6,000 and $2,000, respectively.

   Merle performed repair jobs in Years 1 through 4 as follows:

   Year 1: 100 jobs,

   Year 2: 300 jobs and

   Year 3: 400 jobs.

   On January 1, Year 4, before any depreciation was recorded for Year 4, Merle accepted a cash offer and sold the property for $33,000 that same day.  The sale price of $33,000 was properly allocated to land, building and equipment, respectively, as follows:  $14,500, $16,000 and $2,500.

   Assume all accounting for depreciation had been properly done in Years 1, 2 and 3.

   How much Loss should Merle Recognize on the sale of this Equipment? ________

Answer 1

Answer :

Type of Assets	Land	Buiding	Equipment
Value (A)	12000	11000	5000
Number/ Number of Years		15	4000
		Years	Jobs
A/b		733.33	1.25
Rate of Deprication		6.67
Rate of Double Depreciation		13.33
Depreciation Calculation
Depreciation Year 1 (B)	No Depreication	733.33	125
	Depreication For 6 months
Value after Year 1 (A-B) = C	12000	10266.67	4875
Depreciation of Year 2 (D)	0	1368.89	375
Value after Year 2 (C-D) = E	12000	8897.78	4500
Depreciation of Year 3 (F)	0	1186.37	500
Value after Year 3 (E-F) = G	12000	7711.41	4000
Sale of Assets (H)	14500	16000	2500
Amount (H-G) = I	-2500	-8288.59	1500
Type	Profit	Profit	Loss