Accounting I ACCT 1211 Assignment 9 - Depreciation & Journal Entries

This assignment solution for ACCT 1211: Accounting I, Assignment 9, addresses several key accounting concepts. Question 1 focuses on depreciation methods, including straight-line, units-of-production, and double-declining balance, with calculations and comparative analysis. Question 2 involves journal entries related to equipment purchases and repairs. Question 3 deals with journal entries for an oil lease, including amortization and revenue recognition. Question 4 covers goodwill accounting, including initial entries and subsequent amortization. Question 5 presents a comprehensive scenario involving land, building, and equipment, requiring journal entries for various transactions, including purchases, depreciation, and disposals, culminating in a balance sheet analysis.

ACCT 1211: Accounting I A9-1
Acct 1211_Student ID_Student
Name_Assignment_9
Question 1
(25 marks)
A.
Amortization Expense Per Year
Straight- Units-of- Double-Declining
Year Line Production Balance
2018 $160,000 $240,000 $320,000
2019 $160,000 $128,000 $106,667
2020 $160,000 $115,200 $35,556
$480,000 $483,200 $462,222
Computations:
Straight-Line:
Purchase price = $500,000
Residual = $20,000
Value = $480,000
Depreciation Value = $480,000 / 3 = 160,000
Units-of-Production:
Purchase price = $500,000
Residual = $20,000
Value = $480,000
Total units produced = 3,000,000
Unit of product = $480,000 / 3,000,000 = 0.16
Year Units Produced (A) Units (B) Depreciation (A*B)

A9-2 Assignment 9
2018 15,00,000 0.16 2,40,000
2019 8,00,000 0.16 1,28,000
2020 7,20,000 0.16 1,15,200
Double-Declining Balance:
Year Value Rate Depreciation
2018
4,80,000
0.67 3,20,000
2019
1,60,000
0.67 1,06,667
2020 53,333 0.67 35,556
B.
Double-Declining Balance provides the lowest deprecation, which will increase the net income
for the fiscal year. The high net income does not mean the equipment was used more efficiently,
where it only means that smaller amount of asset cost was allocated to depreciation cost.
C.
Units-of-Production method traced the wear and tear on the machine cost adequately, as it was
charged on the basis of production conducted by the machine.
D.
Year Straight-Line Double-Declining Balance
2018 $320,000
2019 $80,000
2020 $80,000
$160,000 + $320,000 = $480,000

ACCT 1211: Accounting I A9-3

A9-4 Assignment 9
Question 2
(25 marks)
General Journal
DATE
2018
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
Feb 01 Purchases $10,000
To Cash $10,000
Feb 08 Repair expense-Equipment $3,000
To Cash $3,000
Feb 09 Modification expense-Equipment $2,000
To Cash $2,000
Oct 20 Maintenance $600
To Cash $600
Dec 31 Amortization expense $2,000
Accumulated Depreciation Equipment $2,000

ACCT 1211: Accounting I A9-5
General Journal
DATE
2019
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
Mar 14 Repair expense-Equipment $700
To Cash $700
Aug 01 Purchased new Machinery $20,000
Cash $16,000
Allowance $4000
Dec 31 Amortization expense $2,000
Accumulated Depreciation Equipment $2,000

A9-6 Assignment 9
Question 3
(15 marks)
A.
General Journal
DATE
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
Oil Lease $20,000,000
To Cash $20,000,000
Environmental tests $600,000
Drilling $200,000
To Cash $800,000
Cash $300,000
Notes Payable $300,000
The entry for one year’s amortization and sale of oil are:
General Journal
DATE
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
Accounts Receivable $19,000,000
To Sales $19,000,000
Amortization expense $300,000
Accumulated Depreciation Oil Lease $300,000
B.

ACCT 1211: Accounting I A9-7
Particulars Amount
Accounts receivable $19,000,000
Lease $20,000,000
Depreciation $300,000
Lease Value $19,700,000
Accounts payable $300,000

A9-8 Assignment 9
Question 4
(10 marks)
Part 1
1.
General Journal
DATE
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
Jun 05 Assets $1,800,000
Good Will $1,000,000
To Liability $600,000
To Share Capital $2,500,000
2.
Goodwill needs to be provided accounted in notes of accounts of the organisation.
Part 2
1.
General Journal
DATE
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
Jan 01 Patent $3,000,000
Lawsuit cost $300,000
To Cash $3,300,000
Amortization Expense $330,000
To Depreciation accumulated Patent $330,000
2.
Particulars Amount
Lease 33,00,000
Depreciation 3,30,000

ACCT 1211: Accounting I A9-9
Lease vale 29,70,000

A9-10 Assignment 9
Question 5
(25 marks)
A.
General Journal
DATE
2018
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
Feb 01 Land $900,000
Building $1,600,000
Equipment $800,000
Legal fees $100,000
Goodwill $600,000
To Cash $3,100,000
Mar 01 Purchased Van $60,000
To Cash $60,000
Jun 01 Maintenance-equipment $65,000
To Cash $65,000
Dec 31 Amortization-equipment $75,000
Amortization-Building $70,000
To Accumulated Depreciation $145,000

ACCT 1211: Accounting I A9-11
General Journal
DATE
2019
ACCOUNT TITLES AND
EXPLANATIONS
POST.
REF. DEBIT CREDIT
July 01 Cash $40,000
To Van $40,000
Dec 31 Amortization-equipment $75,000
Amortization-Building $70,000
To Accumulated Depreciation $145,000
B.
Complex Computer Ltd. had a December 31 year end
Land $900,000
Building $1,460,000
Equipment $650,000

A9-12 Assignment 9