E9-1

a. Explain the application of the cost principle in determining the acquisition cost of plant
In this scenario, by using the cost principle, the purchase cost of the factories assets this will that all b
accounted for and they are very important to get the assets in order to establish it's purpose.

b. List the numbers of the foregoing transactions, and opposite each indicate the account
(Choose from the following accounts: Land, Factory Machinery, Delivery Truck, Land impro
1
2
3
4
5
6
7
8

Property
Plant Machines
Delivery Machines
Land Renovations
Delivery Machines
Plant Machines
Prepaid Insurance
License Expenditure

E9-7

a. Compute depreciation expense for 2011 and 2012 using (1) the straight-line method, (2
1
$30,000 - $2,000 = $28,000
2011;
$28,000 - 8 (years) = $3,500
2012:
$28,000 - 8 (years) = $3,500
Using a Total Estimated units of $0.28 per mile
2
Annual Depletion Expense = $4,200
2011
Annual Depletion Expense = $3,360
2012
3
2011
2012

Annual Depreciation Expense

$7,500
$5,625

b. Assume that Brainiac uses the straight-line method

(1) Prepare the journal entry to record 2011 depreciation
(2) Show how the truck would be reported in the December 31, 2011 balance s
1
Account Title
Depreciation Expense
Accumulated depreciation - Delivery truck
2
Delivery Truck
Less: Accumulated depreciation

Debit
$3,500

$30,000

E9-12
Prepare necessary adjusting entries at December 31 to record amortization required by th
Account Title
Debit
Dec. 31
Amortization Expense - Patent
$12,000
Patents

P9-7B
a. Prepare journal entries to record the entries
Account Title
Debit
Credit
Jan. 2
Patents
$45,000
Cash
$45,000
Jan. Research
June
Expense
$230,000
Cash
$230,000
Sept. 1
Advertising Expense
$125,000
Cash
$125,000
Oct. 1
Copyright
$200,000
Cash
$200,000
b. Prepare journal entries to recorde the 2012 amortization expense for intangible assets
Account Title
Debit
Dec. 31
Amortization Expense-Patents
$15,000
Patents
Amortization Expense-Copyright
$7,000
Copyright

c. Prepare the intangible assets section of the balance sheet at December 31, 2012.
Patents($135,000-$14,500=$120,500)
Copyright($236,000-$8,000=$228,000)

d. Prepare the note to the financials on Time's intangibles as of December 31, 2012

Patent 1 The total expenses $145,000. They have a $100,000 that would be paid off over a 10 year p
the balance of $45,000 will be paid over a 9 year period.
Patent 2 Has zero cost

Copyright 1 The total expense is $60,000 which would be paid off over a 10 year period.
Copyright 2 The total expense is $200,000 which would be apid off over a 50 year period.

e acquisition cost of plant assets.

ories assets this will that all bills are
stablish it's purpose.

each indicate the account title to which each expenditure should be debited.
Delivery Truck, Land improvements, Prepaid Insurance)

e straight-line method, (2) the units-of-activity method, and (3) the double-declining balance meth

ember 31, 2011 balance sheet

Credit
$3,500

$3,500

$26,500

mortization required by the events above

Credit
$12,000

ense for intangible assets

Credit
$15,000
$7,000

December 31, 2012.

$120,500
229,000
$349,000

December 31, 2012

d be paid off over a 10 year period and

a 10 year period.
r a 50 year period.

ning balance method.