During the current year, Rothchild, Inc., purchased two assets that are described as follows.

 

Heavy Equipment Purchase price, $375,000. Expected to be used for 10 years, with a residual value at the end of that time of $60,000. Expenditures required to recondition the equipment and prepare it for use, $75,000. Patent Purchase price, $85,000. Expected to be used for five years, with no value at the end of that time. Rothchild depreciates heavy equipment by the declining-balance method at 250 percent of the straight-line rate. It amortizes intangible assets by the straight-line method. At the end of two years, because of changes in Rothchild's core business, it sold the patent to another company for $45,000.

 

~Instructions

 

Compute the amount of depreciation expense on the heavy equipment for each of the first three years of the asset's life.

 

Compute the amount of amortization on the patent for each of the two years it was owned by Rothchild.

 

Prepare the plant and intangible assets section of Rothchild's balance sheet at the end of the first and second years. Also, calculate the amount of the gain or loss on the patent that would be included in the second year's income statement

Answer rating: 100% (QA)

ANSWER Lets address each part of the question 1 Compute the amount of depreciation expense on the heavy equipment for each of the first three years of ... View the full answer