P$8-6$

LO$8-2,8-3,8-6$

Recording Journal Entries Related to Various Long$-$Lived Assets $($AP$8-6)$

During the current year ending on December $31,$ BSP Company completed the following transactions:

a$.$ On January $1,$ purchased a patent for $\backslash (\backslash$$ $28,000\backslash )$ cash $($estimated useful life, seven years$).$

b$.$ On January $1,$ purchased another business for $\backslash (\backslash$$ $164,000\backslash )$ cash, including $\backslash (\backslash$$ $10,000\backslash )$ for goodwill. The assets included accounts receivable with a fair value of $\backslash (\backslash$$ $12,000\backslash )$ and property and equipment with a fair value of $\backslash (\backslash$$ $142,000\backslash )($with a residual value of $\backslash (\backslash$$ $15,000\backslash )$ and estimated useful life of $10$ years$).$ The company assumed no liabilities. Goodwill has an indefinite life.

c$.$ On December $31,$ constructed a storage shed on land leased from D$.$ Heald. The cost of the shed was $\backslash (\backslash$$ $15,600\backslash ).$ The company uses the straight$-$line amortization method. The lease will expire in three years. $($Amounts spent to enhance leased property are capitalized as intangible assets called Leasehold Improvements.$)$

d$.$ Total expenditures for ordinary repairs were $\backslash (\backslash$$ $5,500\backslash )$ during the current year.

e$.$ On December $31$ of the current year, sold Machine A for $\backslash (\backslash$$ $6,000\backslash )$ cash. Original cost was $\backslash (\backslash$$ $25,000\backslash )$; accumulated depreciation to December $31$ of the prior year was $\backslash (\backslash$$ $16,000\backslash )($on a straight$-$line basis with a $\backslash (\backslash$$ $5,000\backslash )$ residual value and five$-$year useful life$).$

f$.$ On December $31$ of the current year, paid $\backslash (\backslash$$ $5,000\backslash )$ for a complete reconditioning of Machine B acquired on January $1$ of the prior year. Original cost, $\backslash (\backslash$$ $31,000\backslash )$; accumulated depreciation to December $31$ of the prior year was $\backslash (\backslash$$ $1,600\backslash )($on a straight$-$line basis with a $\backslash (\backslash$$ $7,000\backslash )$ residual value and $15-$year useful life$).$

Required:

$1.$ Record journal entries for transactions $($a$)$ through $(\backslash ($ f $\backslash )).$

$2.$ For each of the assets involved in transactions $($a$)$ through $\backslash (($f$)\backslash ),$ record the adjusting entry for depreciation or amortization expense at the end of the current year. If no adjusting entry is needed, explain why.