Zhou Corporation completed the following transactions during fiscal year 2016 January
Zhou Corporation completed the following transactions during fiscal year 2016:
January 1 Purchased a license for $ 7,200 cash with an estimated useful life of four years.
January 1 Repaved the parking lot of the building leased from H. Lane for $ 17,800. The lease will expire in 10 years, but the estimated useful life of the parking lot is five years with no residual value. (Amounts spent to enhance leased property are capitalized as intangible assets called leasehold improvements.)
July 1 Purchased another business for $ 120,000 cash. The transaction included $ 115,000 for the assets and $ 24,000 for the liabilities assumed by Zhou. The remainder was goodwill with an indefinite life.
November 30 Paid $ 6,700 for ordinary repairs and regular maintenance of the building.
December 31 Sold Machine A for $ 6,000 cash. The machine was acquired for $ 21,500 on January 1, 2013, and had a useful life of four years and a residual value of $ 3,500. Its accumulated depreciation totalled $ 13,500 at December 31, 2015.
December 31 Paid $ 7,000 for a complete reconditioning of Machine B, which was acquired on July 1, 2012, for $ 18,000. By December 31, 2015, accumulated depreciation totalled $ 7,000. Zhou expected to use the machine for eight years and then sell it for $ 2,000 at the end of its useful life. The company uses the straight- line method of depreciation and amortization.
1. For each of these transactions, indicate the accounts affected and the amounts and direction of the effects (+ for increase and – for decrease) on the accounting equation. Use the following structure:
2. Compute the amount of depreciation and amortization expense for Machine B to be recorded at December 31, 2017, the company’s year- end.
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