During the 2012 annual accounting period, Chu Corporation comple

During the 2012 annual accounting period, Chu Corporation completed the following transactions:

a. On January 1, 2012, purchased a license for $7,200 cash (estimated useful life, three years).

b. On January 1, 2012, repaved the parking lot of the building leased from I. Kumara. The cost was $7,800; the estimated useful life was five years with no residual value. The company uses straight-line depreciation. The lease will expire in 10 years. (Amounts spent to enhance leased property are capitalized as intangible assets called Leasehold Improvements.)

c. On July 1, 2012, purchased another business for $120,000 cash. The transaction included $115,000 for assets and $24,000 for the liabilities assumed by Chu. The remainder was goodwill with an indefinite life.

d. On December 31, 2012, sold Machine A for $5,000 cash. Original cost $21,500; accumulated depreciation (straight line) to December 31, 2011, $13,500 ($3,500 residual value and four-year life).

e. Total expenditures during 2012 for ordinary repairs and maintenance were $6,700.

f. On December 31, 2012, paid $8,000 for a complete reconditioning of Machine B acquired on January 1, 2009. Original cost $18,000; accumulated depreciation (straight line) to December 31, 2011, $12,000 ($2,000 residual value and four-year life).


Required:

1. For each of these transactions, indicate the accounts, amounts, and effects (+ for increase and – for decrease) on the accounting equation. Use the following structure:

Date Assets = Liabilities + Stockholders’ Equity

2. For each of these assets, compute depreciation and amortization to be recorded at the end of the year on December 31, 2012.


Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
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...
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...

Members

  • Access to 2 Million+ Textbook solutions
  • Ask any question from 24/7 available
    Tutors
$9.99
VIEW SOLUTION

OR

Non-Members

Get help from Accounting Tutors
Ask questions directly from Qualified Online Accounting Tutors .
Best for online homework assistance.