Problem 1 - For each of the following scenarios, indicate whether an asset has been impaired (select Yes or No) and, if so, the amount of loss that should be recorded.
|
|
|
Carrying Amount
|
Values in Use
|
Fair Value Less Costs to Sell
|
Is Asset Impaired?
|
If So, Amount of Loss
|
|
a.
|
Machine
|
$16,700
|
$10,600
|
$9,100
|
|
|
|
b.
|
Copyright
|
31,600
|
41,600
|
40,500
|
|
|
|
c.
|
Factory building
|
59,200
|
26,600
|
29,600
|
|
|
|
d.
|
Building
|
233,000
|
243,000
|
216,000
|
|
|
Problem 2 - Marriott International is a worldwide operator and franchisor of hotels and related lodging facilities totaling over $2.6 billion in property and equipment. It also develops, operates, and markets timeshare properties totalling nearly $3.2 billion. Assume that Marriott replaced furniture that had been used in the business for five years. The records of the company reflected the following regarding the sale of the existing furniture:
Furniture (cost) - $6,800,000
Accumulated depreciation - 6,260,000
Required:
1. Prepare the journal entry for the disposal of the furniture, assuming that it was sold for:
a. $540,000 cash
b. $1,680,000 cash
c. $320,000 cash
Problem 3 - Berj Corporation issued bonds and received cash in full for the issue price. The bonds were dated and issued on January 1, 2013. The coupon rate was payable at the end of each year. The bonds mature at the end of four years. The following schedule has been partially completed (amounts in thousands):
|
Date
|
Cash Paid
|
Interest Expense
|
Amortization
|
Carrying Amount
|
|
January 1, 2013
|
|
|
|
$5,286
|
|
End of year 2013
|
$442
|
$423
|
$19
|
5,267
|
|
End of year 2014
|
442
|
?
|
?
|
5,246
|
|
End of year 2015
|
442
|
?
|
?
|
?
|
|
End of year 2016
|
442
|
?
|
?
|
5,200
|
Required:
1. Complete the amortization schedule.
2. What was the maturity amount of the bonds?
3. How much cash was received at the date of issuance (sale) of the bonds?
4. What was the amount of discount or premium on the bond?
5. How much cash will be disbursed in total for the full life of the bond issue?
6. What method of amortization is being used?
- Effective-interest method
- Straight-line method
- Deferred interest method
7. What is the coupon rate of interest?
8. What is the effective rate of interest?
9. What amount of interest expense should be reported on the statement of earnings each year?
10. Show how the bonds should be reported on the statement of financial position at the end of each year.