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intermediate accounting 11th
Intermediate Accounting IFRS International Adaptation 5th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions
BE11.13 (LO 4) Nieland Industries had one patent recorded on its books as of January 1, 2025. This patent had a book value of $288,000 and a remaining useful life of 8 years. During 2025, Nieland incurred research costs of $96,000 and brought a patent infringement suit against a competitor. On
BE11.12 (LO 5) Indicate whether the following items are capitalized or expensed in the current year.a. Purchase cost of a patent from a competitor.b. Research costs.c. Development costs (after achieving economic viability).d. Organizational costs.e. Costs incurred internally to create goodwill.
BE11.11 (LO 5) Treasure Land plc incurred the following costs in 2025.Cost of laboratory research aimed at discovery of new knowledge£120,000 Cost of testing in search for product alternatives 100,000 Cost of engineering activity required to advance the design of a product to the manufacturing
BE11.10 (LO 5) Sujo Ltd. commenced operations in early 2025. The company incurred HK$60,000,000 of costs such as fees to underwriters, legal fees, governmental fees, and promotional expenditures during its formation. Prepare journal entries to record the HK$60,000,000 expenditure and 2025
BE11.9 (LO 4) Use the information provided in BE11.8. Assume that the recoverable amount of the division is estimated to be HK$750,000. Prepare Waters’ journal entry, if necessary, to record impairment of the goodwill.
BE11.8 (LO 4) Waters Ltd. purchased Jang Group 3 years ago and at that time recorded goodwill of HK$400,000. The Jang Division’s net assets, including the goodwill, have a carrying amount of HK$800,000. The fair value of the division is estimated to be HK$1,000,000. Prepare Waters’ journal
BE11.7 (LO 4) Use the information in BE11.6. Assume that at the end of the year following the impairment (after recording amortization expense), the estimated recoverable amount for the patent is$130,000. Prepare Kenoly’s journal entry, if needed.
BE11.6 (LO 4) Kenoly Corporation owns a patent that has a carrying amount of $300,000. Kenoly expects future net cash flows from this patent to total $210,000 over its remaining life of 10 years. The recoverable amount of the patent is $110,000. Prepare Kenoly’s journal entry, if necessary, to
BE11.5 (LO 3) On September 1, 2025, Winans Ltd. acquired Aumont Enterprises for a cash payment of £700,000. At the time of purchase, Aumont’s statement of financial position showed assets of £620,000,liabilities of £200,000, and equity of £420,000. The fair value of Aumont’s assets is
BE11.4 (LO 2) Gershwin plc obtained a franchise from Sonic Hedgehog Inc. for a cash payment of£120,000 on April 1, 2025. The franchise grants Gershwin the right to sell certain products and services for a period of 8 years. Prepare Gershwin’s April 1 journal entry and December 31 adjusting entry.
BE11.3 (LO 2) Larry Lyon SA spent €68,000 in attorney fees while developing the trade name of its new product, the Mean Bean Machine. Prepare the journal entries to record the €68,000 expenditure and the first year’s amortization, using an 8-year life.
BE11.2 (LO 2) Use the information provided in BE11.1. Assume that at January 1, 2027, the carrying amount of the patent on Celine Dion’s books is $43,200. In January, Celine Dion spends $24,000 successfully defending a patent suit. Celine Dion still feels the patent will be useful until the end
BE11.1 (LO 2) Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2025, for $54,000. The patent has a remaining legal life of 16 years. Celine Dion feels the patent will be useful for 10 years. Prepare Celine Dion’s journal entries to record the purchase of the patent and
25. An intangible asset with an estimated useful life of 30 years was acquired on January 1, 2015, for $540,000. On January 1, 2025, a review was made of intangible assets and their expected service lives, and it was determined that this asset had an estimated useful life of 30 more years from the
24. Recently, a group of university students decided to form a company for the purposes of selling a process to recycle the waste product from manufacturing cheese. Some of the initial costs involved were legal fees and office expenses incurred in starting the business, governmental fees, and stamp
23. In 2024, Jackie Chan Ltd. developed a new product that will be marketed in 2026. In connection with the development of this product, the following costs were incurred in 2025: research and development costs ¥40,000,000, materials and supplies consumed¥6,000,000, and compensation paid to
22. Indicate the proper accounting for the following items.a. Organization costs.b. Advertising costs.c. Operating losses.
21. Which of the following activities should be expensed currently as R&D costs?a. Testing in search for or evaluation of product or process alternatives.b. Engineering follow-through in an early phase of commercial production.c. Legal work in connection with patent applications or litigation, and
20. Research and development activities may include (a) personnel costs, (b) materials and equipment costs, and (c) indirect costs.What is the recommended accounting treatment for these three types of R&D costs?
19. What is the nature of research and development costs? Can development costs be capitalized? Explain.
18. Shi Ltd. determines that its goodwill is impaired. It finds that its recoverable amount is HK$3,600,000 and its recorded goodwill is HK$4,000,000. The fair value of its identifiable assets is HK$14,500,000. What is the amount of goodwill impaired?
17. Explain how losses on impaired intangible assets should be reported in income.
16. Last year, Zeno Company recorded an impairment on an intangible asset. Recent appraisals indicate that the asset has increased in value. Should Zeno record this recovery in value?
15. Braxton Inc. is considering the write-off of a limited-life intangible because of its lack of profitability. Explain to the management of Braxton how to determine whether a write-off is permitted.
14. In examining financial statements, financial analysts often write off goodwill immediately. Comment on this procedure.
13. Under what circumstances is it appropriate to record goodwill in the accounts? How should goodwill, properly recorded on the books, be written off in order to conform with IFRS?
12. What is goodwill? What is a bargain purchase?
11. Explain the difference between artistic-related intangible assets and contract-related intangible assets.
10. Izzy Ltd. purchased a patent for £350,000 which has an estimated useful life of 10 years. Its pattern of use or consumption cannot be reliably determined. Prepare the entry to record the amortization of the patent in its first year of use.
9. McNabb Company spent $190,000 developing a new process prior to achieving economic viability, $45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented, all in the year 2025. How should these costs be accounted for in 2025?
8. Novartis (CHE) acquired a trademark that is helpful in distinguishing one of its new products. The trademark is renewable every 10 years at minimal cost. All evidence indicates that this trademarked product will generate cash flows for an indefinite period of time. How should this trademark be
7. What should be the pattern of amortization for a limited-life intangible?
6. What are factors to be considered in estimating the useful life of an intangible asset?
5. In 2025, Ghostbusters SA spent €420,000 for “goodwill” visits by sales personnel to key customers. The purpose of these visits was to build a solid, friendly relationship for the future and to gain insight into the problems and needs of the companies served. How should this expenditure be
4. Why does IFRS make a distinction between internally created intangibles and purchased intangibles?
3. Intangibles have either a limited useful life or an indefinite useful life. How should these two different types of intangibles be amortized?
2. If intangibles are acquired for shares, how is the cost of intangibles determined?
1. What are the three main characteristics of intangible assets?
CA10.4 (LO 1) Ethics (Depreciation Choice) Jerry Prior, Beeler AG’s controller, is concerned that net income may be lower this year. He is afraid upper-level management might recommend cost reductions by laying off accounting staff, including him.Prior knows that depreciation is a major expense
CA10.3 (LO 1) Writing (Depreciation Concepts) As a cost accountant for San Francisco Cannery, you have been approached by Phil Perriman, canning room supervisor, about the 2025 costs charged to his department. In particular, he is concerned about the line item “depreciation.” Perriman is very
CA10.2 (LO 1, 2) Writing (Depreciation—Strike, Units-of-Production, Obsolescence) Presented below are three different and unrelated situations involving depreciation accounting. Answer the question(s) at the end of each situation.Situation I: Recently, Nai Su Ltd. experienced a strike that
CA10.1 (LO 1) (Depreciation Basic Concepts) Hakodat Manufacturing Group was organized January 1, 2025. During 2025, it has used in its reports to management the straight-line method of depreciating its plant assets.On November 8, you are having a conference with Hakodat’s officers to discuss the
*P10.14 (LO 5, 7) (Revaluations) Parnevik Group uses revaluation accounting for a class of equipment it uses in its golf club refurbishing business. The equipment was purchased on January 2, 2025, for €500,000; it has a 10-year useful life with no residual value. Parnevik has the following
*P10.13 (LO 5, 7) (Revaluations) Wang Ltd. owns land (cost HK$200,000) for which it uses revaluation accounting. It has the following information related to this asset, the only land asset that Wang owns.Date Fair Value January 1, 2024 HK$200,000 December 31, 2024 215,000 December 31, 2025 185,000
P10.12 (LO 1, 2, 4) (Depletion and Depreciation—Mining) Khamsah Mining Company has purchased a tract of mineral land for $900,000. It is estimated that this tract will yield 120,000 tons of ore with sufficient mineral content to make mining and processing profitable. It is further estimated that
P10.11 (LO 4) (Mineral Resources) Phelps Oil Wildcatters plc has leased property on which oil has been discovered. Wells on this property produced 36,000 barrels of oil during the past year, which sold at an average sales price of £65 per barrel. Total oil resources of this property are estimated
P10.10 (LO 3) (Impairment) At the end of 2025, Sapporo Group tests a machine for impairment.The machine is carried at depreciated historical cost, and its carrying amount is ¥150,000. It has an estimated remaining useful life of 10 years. The machine’s recoverable amount is determined on the
P10.9 (LO 3) (Impairment) Roland SE uses special strapping equipment in its packaging business.The equipment was purchased in January 2024 for €10,000,000 and had an estimated useful life of 8 years with no residual value. At December 31, 2025, new technology was introduced that would accelerate
P10.8 (LO 1, 2) (Depreciation Methods) On January 1, 2024, Luis SA, a small machine-tool manufacturer, acquired for R$1,260,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the residual value was estimated to be R$60,000. Luis estimates that the new
P10.7 (LO 1, 2) (Depreciation for Partial Periods—SL, Act., SYD, and DDB) On January 1, 2023, a machine was purchased for $90,000. The machine has an estimated residual value of $6,000 and an estimated useful life of 5 years. The machine can operate for 100,000 hours before it needs to be
P10.6 (LO 1, 2) Groupwork (Comprehensive Depreciation Computations) Kohlbeck Corporation, a manufacturer of steel products, began operations on October 1, 2024. The accounting department of Kohlbeck has started the plant asset and depreciation schedule (presented after the following information).
P10.5 (LO 1, 2, 5) Groupwork (Comprehensive Property, Plant, and Equipment Problem)Darby Sporting Goods Plc has seen increased demand for its products over the last several years. The last two Olympic Games greatly increased the popularity of basketball around the world. As a result, a European
P10.4 (LO 1, 2) (Depreciation and Error Analysis) A depreciation schedule for semi-trucks owned by Ichiro Manufacturing was requested by your auditor soon after December 31, 2026, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year
P10.3 (LO 1, 2) (Depreciation—SYD, Act., SL, and DDB) The following data relate to the Plant Assets account of Eshkol, Ltd. at December 31, 2025.Plant Assets A B C D Original cost £46,000 £51,000 £80,000 £80,000 Year purchased 2020 2021 2022 2024 Useful life 10 years 15,000 hours 15 years 10
P10.2 (LO 1, 2) (Depreciation for Partial Periods—SL, Act., SYD, and DDB) The cost of equipment purchased by Charleston, SA, on June 1, 2025, is €89,000. It is estimated that the machine will have a €5,000 residual value at the end of its service life. Its service life is estimated at 7
P10.1 (LO 1, 2) Groupwork (Depreciation for Partial Period—SL, SYD, and DDB) Alladin Company purchased Machine #201 on May 1, 2025. The following information relating to Machine #201 was gathered at the end of May.Price $85,000 Credit terms 2/10, n/30 Freight-in costs $ 800 Preparation and
*E10.29 (LO 5, 7) (Revaluation Accounting) Su Ltd. acquired an excavator on January 1, 2023, for¥10,000 (all amounts in thousands). This excavator represents the company’s only piece of equipment, and Su chooses revaluation accounting. This excavator is being depreciated on a straight-line basis
E10.28 (LO 6) Groupwork (Ratio Analysis) A recent annual report of Eastman plc contains the following information.(in millions) Current Year-End Prior Year-End Total assets £13,659 £14,320 Total liabilities 10,630 12,932 Net sales 10,301 10,568 Net income 676 (601)Instructions Compute the
E10.27 (LO 5) (Revaluation Accounting) Falcetto Company acquired equipment on January 1, 2024, for €12,000. Falcetto elects to value this class of equipment using revaluation accounting. This equipment is being depreciated on a straight-line basis over its 6-year useful life. There is no residual
E10.26 (LO 5) (Revaluation Accounting) Use the information in E10.25.Instructions Prepare the journal entries to record the revaluation of the land in each year.
E10.25 (LO 5) (Revaluation Accounting) Pengo Ltd. owns land that it purchased at a cost of ¥400 million in 2023. The company chooses to use revaluation accounting to account for the land. The land’s value fluctuates as follows (all amounts in thousands as of December 31): 2023, ¥450,000; 2024,
E10.24 (LO 5) (Revaluation Accounting) Croatia Company purchased land in 2025 for $300,000.The land’s fair value at the end of 2025 is $320,000; at the end of 2026, $280,000; and at the end of 2027,$305,000.Instructions Prepare the journal entries to record the land using revaluation accounting
E10.23 (LO 4) (Depletion Computations—Minerals) At the beginning of 2025, Callaway Company acquired a mine for $850,000. Of this amount, $100,000 was ascribed to the land value and the remaining portion to the minerals in the mine. Surveys conducted by geologists have indicated that approximately
E10.22 (LO 4) (Depletion Computations—Mining) Henrik Mining purchased land on February 1, 2025, at a cost of €1,250,000. It estimated that a total of 60,000 tons of mineral was available for mining.After it has removed all the mineral resources, the company will be required to restore the
E10.21 (LO 4) (Depletion Computations—Oil) Federer Drilling has leased property on which oil has been discovered. Wells on this property produced 18,000 barrels of oil during the past year that sold at an average sales price of €65 per barrel. Total oil resources of this property are estimated
E10.20 (LO 3) (Impairment) The management of Sprague Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2025. On December 31,
E10.19 (LO 3) (Impairment) Assume the same information as E10.18, except that Pujols intends to dispose of the equipment in the coming year.Instructionsa. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2025.b. Prepare the journal entry (if any) to record
E10.18 (LO 3) (Impairment) Presented below is information related to equipment owned by Pujols SpA at December 31, 2025.Cost €9,000,000 Accumulated depreciation to date 1,000,000 Value-in-use 7,000,000 Fair value less cost of disposal 4,400,000 Assume that Pujols will continue to use this asset
E10.17 (LO 2) (Component Depreciation) Presented below are the components related to an office block that Veenman NV is considering purchasing for €10,000,000.Component Useful Life Value Land Indefinite life €3,000,000 Building structure 60-year life 4,200,000 Building engineering 30-year life
E10.16 (LO 2) (Component Depreciation) Brazil Group purchases a tractor at a cost of €50,000 on January 2, 2025. Individual components of the tractor and useful lives are as follows (zero residual value).Cost Useful Lives Tires € 6,000 2 years Transmission 10,000 5 years Tractor 34,000 10 years
E10.15 (LO 1, 2) (Depreciation for Fractional Periods) On March 10, 2027, No Doubt Company sells equipment that it purchased for $240,000 on August 20, 2020. It was originally estimated that the equipment would have a life of 12 years and a residual value of $21,000 at the end of that time, and
E10.14 (LO 1, 2) (Error Analysis and Depreciation, SL and SYD) Kawasaki Ltd. shows the following entries in its Equipment account for 2026. All amounts (in yen, in thousands) are based on historical cost.Equipment Jan. 1 Balance 133,000 June 30 Cost of equipment sold(purchased prior to 2026)Aug. 10
E10.13 (LO 1, 2) (Depreciation—Replacement, Change in Estimate) Peloton Company constructed a building at a cost of $2,400,000 and occupied it beginning in January 2006. It was estimated at that time that its life would be 40 years, with no residual value.In January 2026, a new roof was installed
E10.12 (LO 1, 2) (Depreciation Computation—Addition, Change in Estimate) In 1998, Abraham AS completed the construction of a building at a cost of €1,900,000 and first occupied it in January 1999.It was estimated that the building would have a useful life of 40 years and a residual value of
E10.11 (LO 1, 2) (Depreciation—Change in Estimate) Machinery purchased for $52,000 by Carver Co. in 2021 was originally estimated to have a life of 8 years with a residual value of $4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2026, it is determined
E10.10 (LO 1) (Depreciation Computations, SYD) Pippen A.Ş. purchased a piece of equipment at the beginning of 2022. The equipment cost 502,000. It has an estimated service life of 8 years and an expected residual value of 70,000. The sum-of-the-years’-digits method of depreciation is being
E10.9 (LO 1, 2) (Component Depreciation) Morrow Manufacturing has equipment that is comprised of five components (amounts in thousands).Component Cost Estimated Residual Estimated Life (in years)A ¥40,500 ¥5,500 10 B 33,600 4,800 9 C 36,000 3,600 8 D 19,000 1,500 7 E 23,500 2,500 6 Instructionsa.
E10.8 (LO 1, 2) (Depreciation Computation—Replacement, Non-Monetary Exchange) Goldman SA bought a machine on June 1, 2023, for €31,800, f.o.b. the place of manufacture. Freight to the point where it was set up was €200, and €500 was expended to install it. The machine’s useful life was
E10.7 (LO 1, 2) (Different Methods of Depreciation) Jeeter Industries presents you with the following information.Description Date Purchased Cost Residual Value Life in Years Depreciation Method Accumulated Depreciation to 12/31/25 Depreciation for 2026 Machine A 2/12/24 $159,000 $16,000 10 (a)
E10.6 (LO 1, 2) (Depreciation Computations—Five Methods, Partial Periods) Agazzi Company purchased equipment for $304,000 on October 1, 2025. It is estimated that the equipment will have a useful life of 8 years and a residual value of $16,000. Estimated production is 40,000 units, and estimated
E10.5 (LO 1, 2) (Depreciation Computations—Four Methods) Maserati SpA purchased a new machine for its assembly process on August 1, 2025. The cost of this machine was €150,000. The company estimated that the machine would have a residual value of €24,000 at the end of its service life. Its
E10.4 (LO 1, 2) (Depreciation Computations—Five Methods) Wenner Furnace Corp. purchased machinery for $279,000 on May 1, 2025. It is estimated that it will have a useful life of 10 years, residual value of $15,000, production of 240,000 units, and working hours of 25,000. During 2026, Wenner
E10.3 (LO 1, 2) (Depreciation Computations—SYD, DDB—Partial Periods) Cosby AG purchased a new plant asset on April 1, 2025, at a cost of €774,000. It was estimated to have a service life of 20 years and a residual value of €60,000. Cosby’s accounting period is the calendar
E10.2 (LO 1) (Depreciation—Conceptual Understanding) Hasselback Company acquired a plant asset at the beginning of year 1. The asset has an estimated service life of 5 years. An employee has prepared depreciation schedules for this asset using three different methods to compare the results of
E10.1 (LO 1) (Depreciation Computations—SL, SYD, DDB) Lansbury Ltd. purchases equipment on January 1, year 1, at a cost of £518,000. The asset is expected to have a service life of 12 years and a residual value of £50,000.Instructionsa. Compute the amount of depreciation for each of years 1
BE10.12 (LO 6) In its annual report, Campbell Soup Company (USA) reports beginning-of-the-year total assets of $7,745 million, end-of-the-year total assets of $6,445 million, total sales of $7,867 million, and net income of $854 million. Compute Campbell’s (a) asset turnover and (b) profit margin
*BE10.11 (LO 5, 7) Obihiro Group has equipment with an original cost of ¥500,000,000 and related accumulated depreciation of ¥100,000,000 on December 31, 2025. The fair value of the equipment at December 31, 2025, is ¥650,000,000. The equipment has a useful life of 4 years remaining after
BE10.10 (LO 4) Everly Corporation acquires a coal mine at a cost of $400,000. Intangible development costs total $100,000. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $80,000), after which it can be sold for $160,000. Everly estimates
BE10.9 (LO 3) Jurassic Company owns machinery that cost $900,000 and has accumulated depreciation of $380,000. The present value of expected future net cash flows from the use of the asset are expected to be $500,000. The fair value less cost of disposal of the equipment is $400,000. Prepare the
BE10.8 (LO 1, 2) Tan Chin Ltd. purchases a building for HK$11,300,000 on January 2, 2025. An engineer’s report shows that of the total purchase price, HK$11,000,000 should be allocated to the building(with a 40-year life, no residual value), HK$150,000 to 15-year property, and HK$150,000 to
BE10.7 (LO 1, 2) Holt plc purchased a computer for £8,000 on January 1, 2024. Straight-line depreciation is used, based on a 5-year life and a £1,000 residual value. In 2026, the estimates are revised. Holt now feels the computer will be used until December 31, 2027, when it can be sold for
BE10.6 (LO 2) Ortiz SA purchased a piece of equipment that cost R$202,000 on January 1, 2025. The equipment has the following components.Component Cost Residual Value Estimated Useful Life A R$70,000 R$7,000 10 years B 50,000 5,000 5 years C 82,000 4,000 12 years Compute the depreciation expense
BE10.5 (LO 1) Cominsky Company purchased a machine on July 1, 2026, for $28,000. Cominsky paid$200 in title fees and county property tax of $125 on the machine. In addition, Cominsky paid $500 shipping charges for delivery, and $475 was paid to a local contractor to build and wire a platform for
BE10.4 (LO 1, 2) Use the information for Lockard SE given in BE10.2. (a) Compute 2025 depreciation expense using the double-declining-balance method. (b) Compute 2025 depreciation expense using the double-declining-balance method, assuming the machinery was purchased on October 1, 2025.
BE10.3 (LO 1, 2) Use the information for Lockard SE given in BE10.2. (a) Compute 2025 depreciation expense using the sum-of-the-years’-digits method. (b) Compute 2025 depreciation expense using the sum-of-the-years’-digits method, assuming the machinery was purchased on April 1, 2025.
BE10.2 (LO 1, 2) Lockard SE purchased machinery on January 1, 2025, for €80,000. The machinery is estimated to have a residual value of €8,000 after a useful life of 8 years. (a) Compute 2025 depreciation expense using the straight-line method. (b) Compute 2025 depreciation expense using the
BE10.1 (LO 1) Fernandez Corporation purchased a truck at the beginning of 2025 for $50,000. The truck is estimated to have a residual value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2025 and 31,000 miles in 2026. Compute depreciation expense for 2025 and 2026.
*2 8 . Mandive Corp., in accordance with IFRS, applies revaluation accounting to plant assets with a carrying amount of $400,000, a useful life of 4 years, and no residual value. At the end of year 1, independent appraisers determine that the asset has a fair value of$360,000. Prepare the entries
27. Vodafone (GBR) reported net income of £2.8 billion, net sales of£42 billion, and average total assets of £140 billion. What is Vodafone’s asset turnover? What is Vodafone’s return on assets?
26. Why might a company choose not to use revaluation accounting?
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