Everly must restore the property (estimated fair value of the obligatio
n is $100,320), after which it can be sold for $200,640. Everly estimat
es that 5,016 tons of coal can be extracted. If 878 tons are extracted th
e first year, prepare the journal entry to record depletion.
Question 22
Francis Corporation purchased an asset at a cost of $58,200 on March
1, 2012. The asset has a useful life of 8 years and a salvage value of $
5,820. For tax purposes, the MACRS class life is 5 years. Compute ta
x depreciation for each year 2012–2017.
Question 23
Celine Dion Corporation purchases a patent from Salmon Company o
n January 1, 2012, for $50,820. The patent has a remaining legal life o
f 16 years. Celine Dion feels the patent will be useful for 10 years. Pre
pare Celine Dion’s journal entries to record the purchase of the patent
and 2012 amortization.
Question 24
Karen Austin Corporation has capitalized software costs of $768,500,
and sales of this product the first year totaled $390,630. Karen Austin
anticipates earning $911,470 in additional future revenues from this p
roduct, which is estimated to have an economic life of 4 years. Comp
ute the amount of software cost amortization for the first year.
(a) Compute the amount of software cost amortization for the first yea
r using the percent of revenue approach.
(b) Compute the amount of software cost amortization for the first yea
r using the straight-line approach.
Question 25
Jeff Beck is a farmer who owns land which borders on the right-ofway of the Northern Railroad. On August 10, 2012, due to the admitte
d negligence of the Railroad, hay on the farm was set on fire and burn
ed. Beck had had a dispute with the Railroad for several years concern
ing the ownership of a small parcel of land. The representative of the
Railroad has offered to assign any rights which the Railroad may have
in the land to Beck in exchange for a release of his right to reimburse
ment for the loss he has sustained from the fire. Beck appears inclined
to accept the Railroad’s offer. The Railroad’s 2012 financial statemen
ts should include the following related to the incident:
A). recognition of a loss only.