ACCOUNTING lV

Exercises to be handed in (value 15 points)

1- The company S.A. purchased: Land, Building, Machinery and Office Furniture for $ 3, 400,000. At
the end of the month the company decided to hire an appraiser and the properties were appraised at:
building $1,400,000, land $1,200,000, machinery $700,000 and office equipment $400,000. Determine
the cost of each asset and make the appropriate journal entry.

Date Accounts and Auxiliary Debit Credit

details

Assets $ 3,400,000

Bank $ 3,400,000

To record the
purchase of several
assets at a global
price.

Transaction:

Active Amount % Prorated cost

Terrain $ 1,200,000 32% $ 1,088,000

Building $ 1,400,000 38% $ 1,292,000

Machinery $ 700,000 19% $ 646,000

Office $ 400,000 11% $ 374,000

equipment

Totals $ 3,700,000 100% $ 3,400,000

Calculation for percentage:

1) $ 1,200,000 / 3,700,000 = 0.32 x 100 = 32

2) $ 1,400,000 / 3,700,000 = 0.38 x 100 = 38
3) $ 700,000 / 3,700,000 = 0.19 x 100 = 19
4) $ 400,000 / 3,700,000 = 0.11 x 100 = 11

Total: 100
 Calculation for proration:

1) 3,400,000 x 32% = 1,088,000

2) 3,400,000 x 38% = 1,219,000
3) 3,400,000 x 19% = 646,000
4) 3,400,000 x 11% = 374,000

Total: $ 3,400,000

Date Account and details Auxiliary Debit Credit

30/xx/xx Property, plant and $ 3,400,000

equipment

Terrain $ 1,088,000

Building $ 1,292,000

Machinery $ 646,000

Office equipment $ 374,000

Assets $ 3,400,000

To record the cost of

assets acquired at a
global price based on
the appraisal.

2- The Company S.A., bought a new truck on credit from Delta Comercial, for RD$1,600,000.00, on
1/1/2020, interest rate 6% per annum for 8 months, incurred in insurance expenses of 30,000, taxes of
25,000, these payments were in cash, determine the cost of the new machinery. Make the
corresponding journal entry.
Cost of new machinery
Price (on credit) $ 1, 600,000
More
Insurance expenses 30,000
Taxes 25,000 = 55,000
= cost of new machinery $ 1,655,000

Interest calculation:

Value of financing
1,600,000 x 6% = 96,000/ 12 = 8,000 x 8 = 64,000

Date Accounts and Auxiliary Debit Credit

details
 1/1/2020 Property, plant and $ 1, 655,000
equipment

Machinery $ 1,655,000

Financial expenses $ 64,000

Interests $ 64,000

Bank $ 55,000

Document x $ 1,664,000
payable

To register the
purchase of a truck
on credit

3- The Company S.A., bought a new machinery in cash from Comercial Julian, for RD$850,000.00, on
1/5/2020, incurred in insurance expenses 20,000, freight 15,000, customs taxes 40,000, installation
25,000, in the transfer the new machinery slipped and broke a base, 18,000 was spent in the repair,
these payments were in cash, determine the cost of the new machinery. Make the corresponding
journal entry.

Cost of new machinery

Price $ 850,000
More
Insurance $ 20,000
Freight $ 15,000
Customs duties $ 40,000
Repair $ 18,000 = $93,000
= cost of new machinery $ 943,000

Date Account and detail Auxiliary Debit Credit

1/5/2020 Property, plant and $ 943,000

equipment

Machinery $ 934,000

Bank $ 934,000

To record the acquisition

of a new machinery in
cash
4- The Company S.A. received a building from one of its stockholders, it was determined that the fair
value of the land at the date of the donation was $8,000,000 pesos. To make the place registration.

Date Account and Auxiliary Debit Credit

detail

Property, plant $ 8,000,000

and equipment

Terrain $ 8,000,000

Donated capital $ 8,000,000

To record the
donation of land
by a shareholder

5- The company, S.A., replaced a piece of equipment whose initial cost was $360,000 with accumulated
depreciation of $310,000. La Cía. Seller receives the used equipment, and a cash payment of
$350,000.
The new equipment is priced at $420,000, and the used equipment could sell for $70,000. To make the
place registration.

Calculations:
1) New equipment acquisition cost $ 350,000
Plus: used equipment value $ 70,000
= cost of new asset $ 420,000

2) Cost of the asset at the date of operation

Used equipment, acquisition cost $ 360,000
Less: accumulated depreciation $ 310,000
= cost according to book $ 50,000

3) Value of used equipment at market price $ 70,000

Less: cost of equipment in book $ 50,000
= gain on exchange of assets $ 20,000

Date Account and detail Auxiliary Debit Credit

x/x/xx Property, plant and $ 420,000

equipment

New equipment $ 420,000

Depreciation acu. $ 310,000

 Property, plant and $ 360,000
equipment

Old equipment $ 360,000

Bank $ 350,000

Gain on exchange of $ 20,000

assets

To record the
acquisition of one
asset for another

6- The company S.A., acquired a machinery, from rosario house as collection of an account receivable
of $430,000, the market value of such machinery 415,000, at the end of the month the company gave
entry to the machinery as an asset. To make the place registration.
Calculation:
Value of machinery $ 415,000
Plus: account receivable $ 430,000
= other expenses $ 15,000

Date Account and detail Auxiliary Debit Credit

Property, plant and $ 415,000

equipment

Machinery $ 415,000

Other expenses $ 15,000

Account receivable $ 430,000

Rosary box $ 430,000

To record the acquisition

of machinery as a
collection of an account
receivable

7- Company S.A. issued 10,000 debentures at $750 each, Company MX accepted the debenture from
Company S.A., 935 shares for machinery sales, whose cash list price is $695,000. To make the place
registration.
Calculation:
10,000 debentures x $ 750 each = 7,500,000
 Date Account and detail Auxiliary Debit Credit

Obligations $ 7,500,000

Issuance of $ 7,500,000
debenture

To register the
issuance of 10,000
to 750 ea.

Calculation of sales of the 935 shares

935 shares x 750 each = $ 701,250
Value of machinery received $ 695,000
Loss on issuance of debentures $ 6,250

Date Account and Auxiliary Debit Credit

detail

x/x/xx Property, plant $ 695,000 $ 695,000

and equipment

Forfeiture of $ 6,250
debenture issue

Bonds issued $ 935

To record the
acquisition of 935
Shares at 750
each in payment
of machinery

8- Company S.A., as of January 1, 2020, obtained a patent for product B, in the amount of
RD$500,000.00.
 Record the transaction and amortization for the first year.

Date Account and details Auxiliar Debit Credit

y

1/1/2020 Patents $ 500,000

Bank $ 500,000

To register the
patent obtained to
explore the product
 for 20 years.

Amortization calculation first year 12/31/2020

500,000 / 20 years = $25,000

Date Account and detail Auxiliar Debit Credit

y

31/12/2020 General and $ 25,000

administrative
expenses

Patent amortization $ 25,000

Patents $ 25,000

To record the
amortization of the 1st
year of the patent of
the product B

9- The Company S.A., as of January 1, 2020, occupies a leased land and has signed a 10-year lease, the
Company has built a warehouse to manufacture its products for $900,000.00, this building is
estimated to have a useful life of 35 years, a depreciation rate of 10% will be used.
 Record the transaction and amortization for the first year.

Date Account and detail Auxiliary Debit Credit

1/1/2020 Improvements on $ 900,000

property

Bank $ 900,000

To record the cost of

the construction of a
building on a 35-year
leasehold property

Estimate: 12/31/2020
  Form 1: 900,000 / 10 years = 90,000
 Form 2: 900,000 / 10 % = 90,000

Date Account and detail Auxiliar Debit Credit

y

31/12/2020 General and $ 90,000

administrative
expenses

Leased property $ 90,000

Leasehold $ 90,000
improvements

To record the
amortization of the
first year of the
improvement on a 10-
year leasehold
property

Exercises methods for calculating depreciation of fixed assets:

1- Machinery was purchased, invoice value $800,000, tax payment $15,000, installation
25,000, residual value $60,000 and its useful life is 5 years, during which it will produce 355,000 units,
in its useful life it will work 49,000 hours. First determine the cost of the machinery which was paid
for in cash.

Preparation of assets
Cost of machinery:

Invoice value $ 800,000

More:
Taxes $ 15,000
Installation $ 25,000
Total cost of machinery $ 840,000

D = Depreciation
C = Acquisition cost 840,000
R = Residual value 60,000
P = Useful life 5 years, 355 produced, 49,000 hours.

In the second year, the machinery produced 55,500 units and worked 5,900 hours.
Determine the second year depreciation by the following methods:
a) Straight line method (make chart of all years)

C = Acquisition cost $ 840,000

R = Residual Value $ 60,000
P = Useful life 5 years

D = C-R = 840,000 - 60,000

P 5 years

D = 780,000 + D = 156,000 Annual depreciation

5 Years
Table of depreciation:

Years Annual depreciation Accumulated Book value

depreciation

0 0 0 $ 840,000

1 $ 156,000 $ 156,000 $ 684,000

2 $ 156,000 $ 312,000 $ 528,000

3 $ 156,000 $ 468,000 $ 372,000

4 $ 156,000 $ 624,000 $ 216,000

5 $ 156,000 $ 780,000 $ 60,000

C-R R

b) Sum of digits (make table of all years)

C = acquisition cost $ 840,000
R= Residual value $ 60,000
P = Useful life 5 years

D = (C-R) x Fraction

1) D = ( 840,000 - 60,000) x 5/15 = 260,000

2) D = (840,000 - 60,000) x 4/15 = 208,000
3) D = (840,000 - 60,000) x 3/15 = 156,000
4) D = (840,000 - 60,000) x 2/15 = 104,000
5) D = (840,000 - 60,000) x 1/15 = 52,000
 Years Fraction Annual depreciation Accumulated Book value
depreciation

0 0 0 0 $ 840,000

1 5/15 $ 260,000 $ 260,000 $ 580,000

2 4/!5 $ 208,000 $ 468,000 $ 372,000

3 3/15 $ 156,000 $ 624,000 $ 216,000

4 2/15 $ 104,000 $ 728,000 $ 112,000

5 1/15 $ 52,000 $ 780,000 $ 60,000

C-R R

c) Working hours

T = Rate
C= Acquisition cost $ 840,000
R= Residual value $ 60,000
P = Useful life 49,000 hours

T = (C-R) T= 840,000 - 60,000

Hour 49,000 hours

T = 780,000 = t = 15.91 for each job

49,000 hours
Assume that in the second year I work 5,900 hours.

D = 5,900 hours x $15.91 = $93,869 2nd year annual depreciation.

d) Units produced
T = Rate
C = Acquisition cost $ 840,000
R = Residual value $ 60,000
P = Useful life $ 355,000 units

T = (C-R) T= 840,000 - 60,000

355,000 Units
T = 780,000 = 2.19
355,000 pcs.
Suppose that in the 2nd year I work 55,500 units.

D = 55,500 Units x 2.19 = 121,545 annual depreciation

2- The Company S.A., as of December 31, 2020, shows the following net balances in property, plant and
equipment:
Land RD$ 10, 000,000.00
Building 6, 800,000.00
Office furniture and equipment 940,000.00
Machinery 1, 760,000.00

Determine the depreciation for a year 2020 according to the method of law 11-92.

Assets Book value Percentages Annual depreciation

Building $ 800,000.00 5% $ 40,000.00

Office furniture and $ 940,000.00 25% $ 235,000.00

equipment

Machinery $ 1,760,000.00 15% $ 264,000

TOTAL $ 539,000

Date Accounts and details Auxiliary Debit Credit

31/12/2020 General and administrative $ 539,000

expenses

Depreciation $ 539,000

Accumulated building $ 40,000.00

depreciation

Accumulated depreciation $ 235,000.00

furniture and office
equipment

Depreciation of machinery $ 264,000.00

To record depreciation of
assets as of 12/31/2019

3- The Company S.A., acquires a machinery at a cost of RD$ 32,000.00, useful life 6 years, with a
residual value of 4,000, depreciation rate by the straight line method would be 16%. Determine the
depreciation according to the accelerated depreciation method.

C = Acquisition cost $ 32,000.00

R = Residual value $ 4,000.00
P = Useful life 6 years
D = (C-R) x rate
1) D = (32,000 - 4,000) x 32% = 8,960
2) D = 23,040 x 32% = 7,373
3) D = 15,667 x 32% = 5,613. 4
4) D = 10,654 x 32% = 3,409. 2
5) D = 7,245 x 32% = 2,318. 2
6) D = 4,926 x 32% = 1,576. 3

Rate: 16% x 2 = 32%.

Years Annual depression Cumulative Book value

depression

0 0 0 $ 32,000

1 $ 8,960 $ 8,960 $ 23,040

2 $ 7,373 $ 16,333 $ 15,667

3 $ 5,013.4 $ 21,346.2 $ 10,654

4 $ 3,409.2 $ 24,755.4 $ 7,245

5 $ 2,318.2 $ 27,074 $ 4,926

6 $ 1,576.3 $ 28.650.3 $ 3,350

C-R R

Exercises Sales of a Fixed Asset:

1- The Company, S.A., had machinery with an acquisition cost of $540,000.00, and currently has an
accumulated depreciation of $490,000.00 and was sold for $40,000.00. make the accounting
entry.

1) Cost of the asset at the date of the transaction:

Used equipment acquisition cost $ 540,000.00
Less: accumulated depreciation $ 490,000.00
= cost according to the book $ 50,000.00
2) Value of used equipment according to market price: $ 40,000
Less: cost of equipment according to book $ 50,000
= loss on sale of assets $ 10,000

Date Account and detail Auxiliary Debit Credit

 x/x/xx Bank $ 40,000

Accumulated depression old $ 490,000

equipment

Loss on sale of assets $ 10,000

Property, plant and $ 540,000

equipment

Used equipment $ 540,000

To record the sale of an asset

below book value.

2- The Company, S.A., had office equipment with an acquisition cost of $610,000.00, and currently
has a book value of $50,000.00 and was sold for $65,000.00. make the accounting entry.

1) Cost of the asset at the date of the transaction:

Used equipment; acquisition cost $ 610,000

Less: book value $ 50,000
= accumulated depreciation $ 560,000

2) Value of used equipment

According to market price: $ 65,000
Less: cost of equipment according to book $ 50,000
= gain on sale of assets $ 15,000

Date Account and details Auxiliary Debit Credit

x/x/xx Bank $ 65,000

Accumulated depression equipment $ 560,000

Property, plant and equipment $ 610,000

Used equipment $ 610,000

Gain on sale of assets $ 15,000

To record sales of an asset in excess of

book value