Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Darby Sporting Goods Inc. has been experiencing growth in the demand for its products over the last several years. The last two Olympic Games greatly increased the popularity of basketball around the world. As a result, a European sports retailing consortium entered into an agreement with Darby's Roundball Division to purchase basketballs and other accessories on an increasing basis over the next 5 years.

To be able to meet the quantity commitments of this agreement, Darby had to obtain additional manufacturing capacity. A real estate firm located an available factory in close proximity to Darby's Roundball manufacturing facility, and Darby agreed to purchase the factory and used machinery from Encino Athletic Equipment Company on October 1, 2013. Renovations were necessary to convert the factory for Darby's manufacturing use.

The terms of the agreement required Darby to pay Encino $94,000 when renovations started on January 1, 2014, with the balance to be paid as renovations were completed. The overall purchase price for the factory and machinery was $752,000. The building renovations were contracted to Malone Construction at $188,000. The payments made, as renovations progressed during 2014, are shown below. The factory was placed in service on January 1, 2015.


1/1
4/1
10/1
12/31
Encino $94,000 $169,200 $206,800 $282,000
Malone 56,400 56,400 75,200

On January 1, 2014, Darby secured a $940,000 line-of-credit with a 12% interest rate to finance the purchase cost of the factory and machinery, and the renovation costs. Darby drew down on the line-of-credit to meet the payment schedule shown above; this was Darby's only outstanding loan during 2014.

Bob Sprague, Darby's controller, will capitalize the maximum allowable interest costs for this project. Darby's policy regarding purchases of this nature is to use the appraisal value of the land for book purposes and prorate the balance of the purchase price over the remaining items. The building had originally cost Encino $564,000 and had a net book value of $94,000, while the machinery originally cost $235,000 and had a net book value of $75,200 on the date of sale. The land was recorded on Encino's books at $75,200. An appraisal, conducted by independent appraisers at the time of acquisition, valued the land at $545,200, the building at $197,400, and the machinery at $84,600.

Angie Justice, chief engineer, estimated that the renovated plant would be used for 15 years, with an estimated salvage value of $56,400. Justice estimated that the productive machinery would have a remaining useful life of 5 years and a salvage value of $5,640. Darby's depreciation policy specifies the 200% declining-balance method for machinery and the 150% declining-balance method for the plant. One-half year's depreciation is taken in the year the plant is placed in service and one-half year is allowed when the property is disposed of or retired. Darby uses a 360-day year for calculating interest costs.

(a) Determine the amounts to be recorded on the books of Darby Sporting Goods Inc. as of December 31, 2014, for each of the following properties acquired from Encino Athletic Equipment Company. (Do not round intermediate calculations for computational purposes. Round final answers to 0 decimal places, e.g. 45,892.)

(1) Land
$
(2) Buildings
$
(3) Machinery
$

(b) find out Darby Sporting Goods Inc.'s 2015 depreciation expense, for book purposes, for each of the properties acquired from Encino Athletic Equipment Company.

Depreciation Expense
(1) Land
$
(2) Buildings
$
(3) Machinery
$

 

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M942724

Have any Question? 


Related Questions in Accounting Basics

In a recent city meeting it was agreed that the city was

In a recent city meeting, it was agreed that the city was going to build a new town hall. Long-term bonds, intergovernmental transfers, and public donations will be used to construct and maintain the building. The major ...

Question 1the financial statement that shows revenue and

Question 1 The financial statement that shows revenue and expenses for a period of time is the A. balance sheet. B. income statement. C. statement of owner's equity. D. statement of cash flows. Question 2 If a company's ...

Assignmentpart 1the president of eec recently called a

Assignment Part 1 The President of EEC recently called a meeting to announce that one of the firm's largest suppliers of component parts has approached EEC about a possible purchase of the supplier. The President has req ...

Careers in accountingaccounting is the study of how

Careers in Accounting Accounting is the study of how businesses track their income and assets over time. Accountants engage in a wide variety of activities in addition to preparing financial statements and recording busi ...

Assignment gaap applicationsinternal controlrecall that in

Assignment: GAAP Applications Internal Control Recall that in Units 2 and 3, you completed the accounting cycle for Dustin Larkin of Quixote Consulting. Quixote Consulting is a part-time consulting business that recently ...

Reading concept summaryno plagiarism must be original

Reading Concept Summary **NO PLAGIARISM. MUST BE ORIGINAL. PLEASE USE REFERENCES IF NEEDED ** Write a 260- to 350-word summary of this week's readings. Please write about the following: Fixed Assets, Depreciation, and In ...

Assignment the apportionmentyou are a census officer in a

Assignment: The Apportionment You are a census officer in a newly democratic nation and you have been charged with using the census data from the table below to determine how 100 congressional seats should be divided amo ...

Discussionpart 1 please respond the following question no

Discussion Part 1 please respond the following question no less then 350 words (original work, no plagiarism, 1 reference "fairness of the federal estate tax and income and principal in fiduciary accounting" please respo ...

Assignmentsongo dealers sells clothing and began trading

Assignment SONGO DEALERS sells clothing and began trading operations on 1 April 20X3. All amounts are paid by cheque, unless otherwise stated. The entity uses the perpetual inventory system and maintains a gross profit p ...

Accountinguse the internet to research an annual report of

Accounting Use the Internet to research an annual report of a retail company. • Then, imagine you are an investor or creditor; suggest the ratios that you believe would provide an investor or creditor with the most impor ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro