Property, Plant, and Equipment and Intangible Assets

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Depreciating Expense and Remaining Life

Complete both sections 1 and 2.

  1. Depreciation Expense Valley Corporation purchased a new piece of equipment on June 1,
    2015. The cost of this machine was $325,000. The company estimated that
    the machine would have a salvage value of $25,000 at the end of its
    service life. Its life is estimated at four years, and its working hours
    are estimated at 50,000 hours. The year end is December 31.Compute the depreciation expense under the following methods in an
    Excel spreadsheet. Each of the following should be considered unrelated:

    1. Straight-line depreciation for 2015
    2. Units of production method for 2015, assuming that machine usage was 13,000 hours
    3. Sum-of-the-years’ digits for 2015
    4. Double-declining balance for 2015
  2. Remaining Life Taylor Lewis Company has provided information on intangible assets as follows.A patent was purchased from Craig Company for $4,000,000 on June 1,
    2015. Lewis estimated the remaining useful life of the patent to be
    eight years. The patent was carried in Craig’s accounting records at a
    net book value of $3,500,000 when Craig sold it to Lewis.During 2016, a franchise was purchased from Faragher Company for
    $360,000. In addition, 8% of revenue from the franchise must be paid to
    Faragher. Revenue from the franchise for 2016 was $1,950,000. Lewis
    estimates the useful life of the franchise to be 12 years and takes a
    full year’s amortization in the year of purchase.Lewis incurred research and development costs in 2016 as follows:

    Materials and equipment $286,500
    Personnel $153,700
    Indirect costs $95,355
    $535,555

    Lewis estimates that these costs will be
    recouped by December 31, 2019. The materials and equipment purchased
    have no alternative uses.On January 1, 2016, because of recent events in the field, Lewis
    estimates that the remaining life of the patent purchased on June 1,
    2015, is only five years from January 1, 2016.

    1. Prepare a schedule showing the intangible
      section of Lewis’s balance sheet at December 31, 2016. Show supporting
      computations in good form.
    2. Prepare a schedule showing the income statement effect for the year
      ended December 31, 2016, as a result of the facts above. Show supporting
      computations in good form.

Please provide short narrative Your submission must show all calculations used to arrive at the
answers. Any written comments must be formatted according to APA Requirements. Insert comments, as needed, using Excel’s “Add a Comment” function.