Delso Company purchased the following on January 1, 20x1: ⚫ Office equipment at a cost of $47,000 with an estimated useful life to the company of three years and a residual value of $14,100. The company uses the double-declining-balance method of depreciation for the equipment. • Factory equipment at an Invoice price of $753,800 plus shipping costs of $38,000. The equipment has an estimated useful life of 107,000 hours and no residual value. The company uses the units-of-production method of depreciation for the equipment. ⚫ A patent at a cost of $336,000 with an estimated useful life of 12 years. The company uses the straight-line method of amortization for Intangible assets with no residual value. The company's year ends on December 31. Required: 1-a. Prepare a partial depreciation schedule of office equipment for 20x1, 20x2, and 20x3. 1-b. Prepare a partial depreciation schedule of factory equipment. The company used the equipment for 9,000 hours in 20x1, 10,200 hours in 20x2, and 9,900 hours in 20x3. 2. On January 1, 20x4, Sanders altered its corporate strategy dramatically. The company sold the factory equipment for $654,900 In cash. Record the entry related to the sale of the factory equipment. 3. On January 1, 20x4, when the company changed its corporate strategy, the demand for one of its products produced by using the patent was significantly reduced. Its patent had estimated future cash flows of $232,000 and a fair value of $210,000. What would the company report on the income statement (account and amount) regarding the patent on January 1, 20x4?
Delso Company purchased the following on January 1, 20x1: ⚫ Office equipment at a cost of $47,000 with an estimated useful life to the company of three years and a residual value of $14,100. The company uses the double-declining-balance method of depreciation for the equipment. • Factory equipment at an Invoice price of $753,800 plus shipping costs of $38,000. The equipment has an estimated useful life of 107,000 hours and no residual value. The company uses the units-of-production method of depreciation for the equipment. ⚫ A patent at a cost of $336,000 with an estimated useful life of 12 years. The company uses the straight-line method of amortization for Intangible assets with no residual value. The company's year ends on December 31. Required: 1-a. Prepare a partial depreciation schedule of office equipment for 20x1, 20x2, and 20x3. 1-b. Prepare a partial depreciation schedule of factory equipment. The company used the equipment for 9,000 hours in 20x1, 10,200 hours in 20x2, and 9,900 hours in 20x3. 2. On January 1, 20x4, Sanders altered its corporate strategy dramatically. The company sold the factory equipment for $654,900 In cash. Record the entry related to the sale of the factory equipment. 3. On January 1, 20x4, when the company changed its corporate strategy, the demand for one of its products produced by using the patent was significantly reduced. Its patent had estimated future cash flows of $232,000 and a fair value of $210,000. What would the company report on the income statement (account and amount) regarding the patent on January 1, 20x4?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Case E
Delso Company purchased the following on January 1, 20x1:
⚫ Office equipment at a cost of $47,000 with an estimated useful life to the company of three years and a residual value of $14,100. The
company uses the double-declining-balance method of depreciation for the equipment.
• Factory equipment at an Invoice price of $753,800 plus shipping costs of $38,000. The equipment has an estimated useful life of
107,000 hours and no residual value. The company uses the units-of-production method of depreciation for the equipment.
• A patent at a cost of $336,000 with an estimated useful life of 12 years. The company uses the straight-line method of amortization
for Intangible assets with no residual value.
The company's year ends on December 31.
Required:
1-a. Prepare a partial depreciation schedule of office equipment for 20x1, 20x2, and 20x3.
1-b. Prepare a partial depreciation schedule of factory equipment. The company used the equipment for 9,000 hours in 20x1, 10,200
hours in 20x2, and 9,900 hours in 20x3.
2. On January 1, 20x4, Sanders altered its corporate strategy dramatically. The company sold the factory equipment for $654,900 In
cash. Record the entry related to the sale of the factory equipment.
3. On January 1, 20x4, when the company changed its corporate strategy, the demand for one of its products produced by using the
patent was significantly reduced. Its patent had estimated future cash flows of $232,000 and a fair value of $210,000. What would the
company report on the income statement (account and amount) regarding the patent on January 1, 20x4?
Complete this question by entering your answers in the tabs below.
Required 1a Required 1b Required 2 Required 3
Prepare a partial depreciation schedule of office equipment for 20x1, 20x2, and 20x3.
Note: Do not round intermediate calculations.
Year
Depreciation
Expense
Accumulated
Depreciation
20x1
20x2
20x3
Net Book
Value
< Required 1a
Required 1b >
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Step 1: Calculating depreciation and recording the sale of assets.
VIEWStep 2: 1a. Partial Depreciation Schedule of Office Equipment
VIEWStep 3: 1b. Prepare a partial depreciation schedule of factory equipment
VIEWStep 4: 2. Journal entry related to the sale of the factory equipment.
VIEWStep 5: 3. Income statement (account and amount) regarding the patent on January 1, 20x4?
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