Reference no: EM133096998
Question - On 10/1/19, Michael paid $40,000 for a car. He incurred legal fees of $4,000 and filing expenses of $6,000 to obtain this car. Michael plans to use this car over the next 10 years. At the end of its useful life, he will be able to sell it for $2,000.
a. How much would Michael amortize this Car for in 2020?
b. How much would Michael amortize this Car for in 2021?
c. During 2021, Michael determined that he would only receive future cash flows and a fair value of $40,000 for owning this car. With that said, is Michael's list impaired? If so, how much?
On 12/1/19, Henry wants to review some trading options for his car. First, here is some information about his old car:
Purchase Price on 1/1/19: $800,000
Accumulated Depre up to date: $240,000
Fair Value on 12/1/20: $675,000
a. For Car #1, Henry could purchase it for $50,000 cash paid plus trade in his old car. The new car #1 has a fair value of $600,000. The old and new cars would be different. What would the journal entry be for this trade?
b. For car #2, Henry could purchase it for $64,000 cash paid plus trade in his old car. The new car #2 has a fair value of $644,000. The old and new cars would be similar. What would the journal entry be for this trade?