Chapter 3
Long-Term Assets
106
AP-13A (
3
)
On July 1, 2015, Earth Corporation purchased factory equipment for $150,000. The equipment
is to be depreciated over eight years using the double-declining-balance method. Earth
Corporation’s year-end is on September 30. Calculate the depreciation expense to be
recorded for the year 2016. Earth Corporation depreciates its assets based on the number of
months it owned the asset during the year.
AP-14A (
6
)
On February 1, 2016, Eastern Company acquired the assets ($800,000) and liabilities ($500,000)
of Newton Corporation. The agreed purchase price is $500,000 in cash. Prepare a journal entry to
record the purchase.
Date
Account Title and Explanation
Debit
Credit
AP-15A (
6
)
On January 1, 2016, Lava Company purchased a $90,000 patent for a new consumer product.
However, the patent’s useful life is estimated to be only 10 years due to the competitive
nature of the product.
Required
a) Prepare a journal entry to record the purchase.
Date
Account Title and Explanation
Debit
Credit
