AC1220 Lab 5.1 Introduction Jake determines that owning the building where Jake’s Computer Sales and Repair operates makes more sense than leasing the facility. On June 1, 20x1, Jake exchanges a $180,000 note payable for the following fixed assets: · Land · Land improvements, including fencing, paving, lighting, and signage · Building Jake hires an independent appraiser who assigns the following market values to the assets: Asset Fair Market Value Land $23,500 Land improvements $8,000 Building $164,500 Requirement 1 Jake must allocate the $195,000 among three asset classes: land, land improvements, and building. a.         Compute the total fair market value (FMV) of the lump-sum purchase of assets. Asset Fair Market Value Land $23,500 Land improvements 8,000 Building 164,000 Total b.         Express land improvements and building as a percentage of the total FMV and allocate the purchase price of $180,000 to land improvements and building—the computation is completed for land. Asset Fair Market Value % of Total Fair Market Value Purchase Price Cost of Asset Land $23,500 12% $180,000 $21,600 Land improvements 180,000 Building 180,000 Total c.         Journalize the purchase of the assets, using the allocated costs computed in Requirement 1b. Date Account and Explanation Debit Credit 6/1/x1 To record purchase of land, land improvements, and building Requirement 2 a.         Classify each of the following spending items as either a capital expenditure or an expense. Indicate the correct choice with an “x”: Spending Capital Expenditure Expense Routine repairs to fencing, $120 (cash) Renovation of building, including addition to warehouse, $15,000 (on account) Resurfaced paving, extending the remaining useful life of the paving from 3 to 5 years, $1,000 (cash) b.         Journalize the expenditures described in Requirement 2a. Date Account and Explanation Debit Credit 6/1/x1 To record repairs to fencing 6/1/x1 To record renovation of building 6/1/x1 To record extraordinary repair Requirement 3 a.         Using the straight-line depreciation method, compute the depreciation expense and the accumulated depreciation that would be recorded at December 20x1. Completing the shaded cells in the following table: Date Asset Cost Depreciable Cost Straight-line Depreciation Rate Depreciation Expense Accumulated Depreciation Book Value Jun 1, 20x1 1/5 x 6/12 b.         Using the double-declining balance method, compute the depreciation expense and the accumulated depreciation that would be recorded at December 20x1. Complete the shaded cells in the following table: Date Asset Cost Depreciable Cost Double-Declining Depreciation Rate Depreciation Expense Accumulated Depreciation Book Value Jun 1, 20x1 c.         Assume that a truck is expected to be driven 7,000 miles through December 31, 20x1, and that each mile driven represents one production unit. Usi.

1. AC1220 Lab 5.1
Introduction
Jake determines that owning the building where Jake’s
Computer Sales and Repair operates makes more sense than
leasing the facility. On June 1, 20x1, Jake exchanges a
$180,000 note payable for the following fixed assets:
·
Land
·
Land improvements, including fencing, paving, lighting, and
signage
·
Building
Jake hires an independent appraiser who assigns the following
market values to the assets:
Asset
Fair Market Value
Land
$23,500
Land improvements
$8,000
Building
$164,500
Requirement 1

2. Jake must allocate the $195,000 among three asset classes: land,
land improvements, and building.
a. Compute the total fair market value (FMV) of the lump-
sum purchase of assets.
Asset
Fair Market Value
Land
$23,500
Land improvements
8,000
Building
164,000
Total
b. Express land improvements and building as a percentage
of the total FMV and allocate the purchase price of $180,000 to
land improvements and building—the computation is completed
for land.
Asset
Fair Market Value
% of Total Fair Market Value
Purchase Price
Cost of Asset
Land
$23,500
12%
$180,000
$21,600
Land improvements
180,000

3. Building
180,000
Total
c. Journalize the purchase of the assets, using the allocated
costs computed in Requirement 1b.
Date
Account and Explanation
Debit
Credit
6/1/x1
To record purchase of land, land improvements, and building

4. Requirement 2
a. Classify each of the following spending items as either
a capital expenditure or an expense. Indicate the correct choice
with an “x”:
Spending
Capital Expenditure
Expense
Routine repairs to fencing, $120 (cash)
Renovation of building, including addition to warehouse,
$15,000 (on account)
Resurfaced paving, extending the remaining useful life of the
paving from 3 to 5 years, $1,000 (cash)
b. Journalize the expenditures described in Requirement
2a.
Date
Account and Explanation
Debit
Credit
6/1/x1

5. To record repairs to fencing
6/1/x1
To record renovation of building
6/1/x1
To record extraordinary repair

6. Requirement 3
a. Using the straight-line depreciation method, compute
the depreciation expense and the accumulated depreciation that
would be recorded at December 20x1. Completing the shaded
cells in the following table:
Date
Asset Cost
Depreciable Cost
Straight-line Depreciation Rate
Depreciation Expense
Accumulated Depreciation
Book Value
Jun 1, 20x1
1/5 x 6/12
b. Using the double-declining balance method, compute
the depreciation expense and the accumulated depreciation that
would be recorded at December 20x1. Complete the shaded cells
in the following table:
Date
Asset Cost
Depreciable Cost
Double-Declining Depreciation Rate
Depreciation Expense
Accumulated Depreciation
Book Value
Jun 1, 20x1

7. c. Assume that a truck is expected to be driven 7,000 miles
through December 31, 20x1, and that each mile driven
represents one production unit. Using the units-of-productions
method, compute the depreciation expense and the accumulated
depreciation that would be recorded at December 20x1.
Complete the shaded cells in the following table:
Date
Asset cost
Depreciation per Unit
Number of Units
Depreciation Expense
Accumulated Depreciation
Book Value
Jun 1, 20x1
d. Which of the three depreciation methods applied in
Requirements 2a through 2c will result in the highest
depreciation expense charge at December 31, 20x1? Determine
the amount.
e. Journalize the depreciation charge at December 31,

8. 20x1, using the amount from Requirement 2c.
Date
Account and Explanation
Debit
Credit
6/1/x1
To record depreciation expense
Requirement 4
a. On June 1, 20x1, Jake acquires a license for $6,000 in
cash. The license grants Jake’s Computer Sales and Repair
exclusive rights to sell the A-line tablet computers for four
years. Journalize the acquisition cost of the license—an
intangible asset.
Date
Account and Explanation
Debit
Credit
6/1/x1

9. To record acquisition cost of license
b. Journalize the amortization expense related to the
license for the six months ended Dec 31, 20x1.
Date
Account and Explanation
Debit
Credit
6/1/x1
To record amortization of license

10. c. At what amount will the license be reported on the
balance sheet at December 31, 20x1?