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butalik [34]
3 years ago
9

During its inception, Devon Company purchased land for $100,000 and a building for $180,000. After exactly 3 years, it transferr

ed these assets and cash of $50,000 to a newly created subsidiary, Regan Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devon uses straight-line depreciation. Useful life for the building is 30 years, with zero residual value. An appraisal revealed that the building has a fair value of $200,000.
1. Based on the information provided, at the time of the transfer, Regan Company should record:

(1) Building at $180,000 and no accumulated depreciation.

(2) Building at $162,000 and no accumulated depreciation.

(3) Building at $200,000 and accumulated depreciation of $24,000.

(4) Building at $180,000 and accumulated depreciation of $18,000.

2. Based on the information provided, what amount would be reported by Devon Company as investment in Regan Company common stock?

(1) $312,000

(2) $180,000

(3) $330,000

(4) $150,000

3. Based on the preceding information, Regan Company will report

(1) additional paid-in capital of $0.

(2) additional paid-in capital of $150,000.

(3) additional paid-in capital of $162,000.

(4) additional paid-in capital of $180,000.

Expert Answer
Business
1 answer:
Margaret [11]3 years ago
5 0

Answer:

1. (4) Building at $180,000 and accumulated depreciation of $18,000.

2. (1) $312,000

3. (3) additional paid-in capital of $162,000.

Explanation:

1. The purchase price of building is $180,000

And the depreciation based on straight line method with a life of 30 years for each year = $180,000/30 = $6,000

Therefore, accumulated depreciation for 3 years = $6,000 \times 3 = $18,000

2. Total amount of assets given to subsidiary shall be the cost, and value of investment in books = $100,000 of land + ($180,000 - $18,000) of building after depreciation + $50,000 cash given

Therefore total value of investment shall be $312,000

3. Additional paid in capital = Total value of investment - Cost of shares (par value of shares)

= $312,000 - ($10 \times 15,000 shares) = $312,000 - $150,000

= $162,000

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The machine's annual depreciation costs are calculated by dividing the machine's purchase price by its installation cost over a 5-year period:Depreciation costs equal (10,700,000 + 56,000) / Number of Years divided by five, or $2,151,200.

The value of a fixed asset less the total accumulated depreciation that has been recorded against it is its depreciated cost. The total amount of capital that is "used up" in a certain time frame, such as a fiscal year, is referred to as the depreciated cost in a broader economic sense. The accuracy with which depreciation is calculated allows one to assess patterns in a company's capital expenditures and how aggressive its accounting practices are. The terms "salvage value," "net book value," and "adjusted cost base" are all synonyms for "depreciated cost." Businesses and private individuals can calculate an asset's useful worth using the depreciated cost technique of asset appraisal.

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7 0
1 year ago
Louvers, Inc., accepted a $15,000, 180-day, 10 percent note from a customer on May 31. On June 30, Louvers prepared a period-end
g100num [7]

Answer:

November 27

Dr Cash $15,750

Cr Interest Revenue $625

Cr Interest Receivable $125

Cr Notes Receivable for $15,000

Explanation:

Preparation for the necessary November 27 entry

November 27

Dr Cash $15,750

[$15,000+($15,000 × 10% × 180/360) ]

($15,000 + $750=$15,750)

Cr Interest Revenue $625

( $15,000 × 10% × 150/360),

Cr Interest Receivable $125

Cr Notes Receivable for $15,000

Note that between the month of June 30 and November 27 we would have a total of 150 days

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3 years ago
Levy Inc. manufactures tractors for agricultural usage. Levy purchases the engines needed for its tractors from two sources: Joh
aev [14]

Answer:

Levy Inc.

Watson = $1,096.60 per engine

Johnson =  $1,015.30 per engine

Johnson is the low-cost supplier.

Explanation:

a) Data and Calculations:

                                           Johnson Engines   Watson Company   Total

Price of engine per unit             $1,000                   $900

Annual demand                           4,000                 18,000             22,000

Activity Cost

Replacing engines a $800,000

Expediting orders b  1,000,000

Repairing engines c 1,800,000

                                              Watson   Johnson   Total

Engines replaced by source   1,980     20           2,000

Late or failed shipments            198        2              200

Warranty repairs (by source) 2,440      60          2,500

Activity Cost Rate:    

Replacing engines a $800,000/2,000 = $400

Expediting orders b  1,000,000/200 = $5,000

Repairing engines c 1,800,000/2,500 = $720

Activity-based Supplier Cost per Engine

                                                   Watson                        Johnson        

Replacing engines a $400     $792,000 ($400*1,980)  $8,000 ($400*20)

Expediting orders b  $5,000    990,000 ($5,000*198)   10,000 ($5,000*2)

Repairing engines c $720      1,756,800 ($720*2,440)  43,200 ($720*60)

Total supplier-related costs $3,538,800                       $61,200

Total price                             16,200,000                   4,000,000

Total cost                            $19,738,800                  $4,061,200

Cost per engine                  $1,096.60                     $1,015.30

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Answer:

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Direct material cost      $2,300

Direct labor cost           $500

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Total cost of job           <u>$3,450</u>

<u></u>

2. Particulars                           Debit     Credit

Overhead Cost                         $1,300

       To materials                                    $800

       To Labour                                        $500

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