Q1. Define the term ‘Intangible Assets’.

Show the accounting treatment of the following

intangible assets.

a) Patnets b) Copy Rights c) Trade Marks/Trade Names

d) Franchises & Licenses e) Goodwill

Q2. At 1 October 2002 Jim had fixed assets as follows:

Land Buildings Machinery

Cost $85,000 $120,000 $74,800
Accumulated depreciation nil 28,920 35,600

Jim’s policy is to provide for a full year’s depreciation in the year of acquisition, but no
provision is made in the year of disposal. Depreciation is provided at the following rates:

Land nil
Buildings written off over 25 year, on the straight line basis (SLM)
Machinery 20% per annum, on the reducing balance basis

During the year to 30 September 2003, Jim added extension to the buildings at a cost of $6,80.
He also acquired a new machine, by paying the dealer $9,000 by cheque and trading in an old
machine for $5,500.

The machine traded in had been acquired in January 2000 at a cost of $11,000.

Jim has asked why depreciation is not charged on the land, but is charged on other fixed assets.

Required:

A) Calculate the profit or loss on the machine which was traded in.
B) As at 30 September 2003, calculate:

(i) The value of Jim’s non-current assets, before deducting depreciation;

(ii) The accumulated depreciation;
(iii) The net book value of non-current assets.
Q3 You are employed in the accounting department of a transport company. One of your tasks is
to maintain the accounting records relating to non-current assets.

During the year to 30 November 2007, a new Lorry was purchased. The invoice includes the
following information:

Date of invoice ----------- 1 January 2007

Volvo model S557 $24,000

Customisation with company logo 1,000
Insurance for year to 31 December 2007 5,000
Fuel Supplied 400
Total cost $30,400

At 30 November 2006, the total cost of the company’s lorries was $242,000, and the
accumulated depreciation was $166,736. During the year to 30 November 2007 a lorry which
cost $22,000 and which had a net book value of $11,264 was sold.

Your company’s policy is to depreciate lorries on the reducing balance basis at a rate of 20% per
annum. It is anticipated that lorries will be sold after three years of use. The expected sale
proceeds are 50% of the cost capitalized on acquisition. A full year’s depreciation is charged in
the year of acquisition, and no depreciation in the year of disposal.
Required:
(a) Calculate the cost of new lorry to be capitalized on acquisition as non-current asset.
(b) Assuming that the new lorry is sold on 31 December 2009, calculate the anticipated loss or
profit on disposal.
(c) prepare the following ledger accounts for the year to 30 November 2007:
i. Lorries at cost;
ii. Accumulated depreciation on lorries

Q4 On January 1, 2012, the ledger of Tyrus Company contains the following liability accounts.
Accounts Payable $30,000
Sales Taxes Payable 5,000
Unearned Service Revenue 12,000

During January, the following selected transactions occurred.

Jan. 1 Borrowed $20,000 in cash from Platteville Bank on a 4-month, 6%, $20,000 note.
5 Sold merchandise for cash totaling $9,752, which includes 6% sales taxes.
12 Provided services for customers who had made advance payments of $8,000.
14 Paid state treasurer’s department for sales taxes collected in December 2011, $5,000.
20 Sold 900 units of a new product on credit at $44 per unit, plus 6% sales tax. This new
product is subject to a 1-year warranty.
25 Sold merchandise for cash totaling $16,536, which includes 6% sales taxes.
Instructions

(a) Journalize the January transactions.

(b) Journalize the adjusting entries at January 31 for (1) the outstanding notes payable, and (2)
estimated warranty liability, assuming warranty costs are expected to equal 5% of sales of the
new product.

(c) Prepare the current liabilities section of the balance sheet at January 31, 2012. Assume no
change in accounts payable.