Question : 83. Dandy, Inc. purchased molding machines at the beginning of 2011 : 1224934

 

83. Dandy, Inc. purchased molding machines at the beginning of 2011 for $10,000. The machines have an estimated salvage value of $2,000 and an estimated life of 5 years or 50,000 hours of operation. Dandy is looking at alternative depreciation methods for the equipment. Determine the following: 

A)

Accumulated depreciation at December 31, 2012, using the straight-line depreciation method.

 

 

B)

Depreciation expense for 2011 using the units-of-activity depreciation method. Assume that the machines are operated for 5,000 hours in 2011 and 8,000 hours in 2012.

 

 

C)

Book value of the equipment at December 31, 2012, using the double-declining-balance depreciation method.

 

 

D)

What are the advantages of using straight-line depreciation for financial reporting purposes?

 

 

 

 

84. Fill in the table shown below indicating the period of time over which each intangible asset should be amortized, and indicate the amount of amortization expense that should be reported for 2011. 

 

Goodwill

Trademark

Cost

$400,000

$75,000

Date of purchase

June 30, 2011

January 1, 2011

Legal life

None

20 years

Useful life

40 years

10 years

 

 

 

2011 Amortization expense

?

?

 

 

 

 

 

85. Alliance CorporationThe Assets section of Alliance Corporation’s balance sheets for the years ended December 31, 2012 and 2011, is provided below. 

Alliance Corporation

Assets Section of Consolidated Balance Sheets (in millions)

 

at December 31,

Assets

2012

2011

Current Assets

 

 

 

 

 

Cash and equivalents

 

$     719

 

$  2,610

 

Short-term investments

 

0

 

886

 

Receivables, less allowances of $1,889 and $97

6,054

 

464

 

Inventories

 

1,791

 

0

 

Prepaid expenses and other current assets

1,710

 

711

 

Total Current Assets

 

$10,274

 

$  4,671

Noncurrent inventories & film costs

 

6,853

 

0

Investments

 

6,886

 

3,824

Land and buildings

$  2,107

 

$   440

 

Cable television equipment

9,966

 

0

 

Furniture, fixtures, and equipment

4,329

 

1,297

 

Property, plant, and equipment

$16,402

 

$1,737

 

Less: Accumulated depreciation

(3,718)

 

(696)

 

Property, plant, & equipment (net)

 

12,684

 

1,041

Music catalogue, and copyrights

 

2,927

 

0

Cable television and sport franchises

 

27,109

 

0

Brands and trademarks

 

10,684

 

0

Goodwill and other intangibles

 

128,338

 

713

Other assets

 

2,804

 

578

Total assets

 

$208,559

 

$10,827

 

 

 

 

 

 

Refer to the information provided for Alliance Corporation. Explain the impact on net income and cash flows of Alliance using straight-line depreciation for financial reporting and accelerated depreciation methods for income tax purposes.