Complete both sections 1 and 2. 1. Depreciation Expense Valley Corporation purchased a new piece of equipment

Question:

Complete both sections 1 and 2.

1. Depreciation Expense

Valley Corporation purchased a new piece of equipment on June 1, 2015. The cost of this machine was $325,000. The company estimated that the machine would have a salvage value of $25,000 at the end of its service life. Its life is estimated at four years, and its working hours are estimated at 50,000 hours. The year end is December 31.

Compute the depreciation expense under the following methods in an Excel spreadsheet. Each of the following should be considered unrelated:

1. Straight-line depreciation for 2015

2. Units of production method for 2015, assuming that machine usage was 13,000 hours

3. Sum-of-the-years' digits for 2015

4. Double-declining balance for 2015

2. Remaining Life

Taylor Lewis Company has provided information on intangible assets as follows.

A patent was purchased from Craig Company for $4,000,000 on June 1, 2015. Lewis estimated the remaining useful life of the patent to be eight years. The patent was carried in Craig's accounting records at a net book value of $3,500,000 when Craig sold it to Lewis.

During 2016, a franchise was purchased from Faragher Company for $360,000. In addition, 8% of revenue from the franchise must be paid to Faragher. Revenue from the franchise for 2016 was $1,950,000. Lewis estimates the useful life of the franchise to be 12 years and takes a full year's amortization in the year of purchase.

Lewis incurred research and development costs in 2016 as follows:

Complete both sections 1 and 2.
1. Depreciation Expense
Valley Corporation purchased

Lewis estimates that these costs will be recouped by December 31, 2019. The materials and equipment purchased have no alternative uses.
On January 1, 2016, because of recent events in the field, Lewis estimates that the remaining life of the patent purchased on June 1, 2015, is only five years from January 1, 2016.
1. Prepare a schedule showing the intangible section of Lewis's balance sheet at December 31, 2016. Show supporting computations in good form.
2. Prepare a schedule showing the income statement effect for the year ended December 31, 2016, as a result of the facts above. Show supporting computations in good form.

Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...