Mastery Problem: Long-Term Assets: Fixed and Intangible Patterson Planning Corp., You have been hired by Patterson Planning Corp., an events planning company that recently had a fire in which some of the accounting records were damaged. In reviewing the fixed asset records, you find three depreciation schedules that are not labeled. They are listed in the following table. One of the assets has a depreciation rate of $4.40 per hour. Year Schedule A Schedule B Schedule C 1 $10,000 $10,125 $8,800 2 6,000 13,500 6,600 3 3,600 13,500 7,480 4 2,160 13,500 6,600 5 740 3,375 4,400 6 7,040 7 4,840 8 Total $22,500 $54,000 $45,760 Depreciation 1. Determine which depreciation method is shown in each schedule on the Patterson Planning Corp. panel. Then match each schedule to the asset description that best characterizes the type of assets often depreciated using that method. Asset Description Depreciation Schedule Used Asset producing steady revenues B Asset with variable in-service time C Asset generating greater revenues in the early years A Feedback 2. For each of the depreciation schedules shown on the Patterson Planning Corp., fill in the following information. If an amount box does not require an entry, leave it blank. A B C Useful life fill in the blank 12a1f2fe3ffb07c_1 fill in the blank 12a1f2fe3ffb07c_2 fill in the blank 12a1f2fe3ffb07c_3 Residual value $fill in the blank 12a1f2fe3ffb07c_4 $fill in the blank 12a1f2fe3ffb07c_5 $fill in the blank 12a1f2fe3ffb07c_6 Asset cost $fill in the blank 12a1f2fe3ffb07c_7 $fill in the blank 12a1f2fe3ffb07c_8 $fill in the blank 12a1f2fe3ffb07c_9 Total operating hours fill in the blank 12a1f2fe3ffb07c_10 fill in the blank 12a1f2fe3ffb07c_11 fill in the blank 12a1f2fe3ffb07c_12 Feedback Think about how depreciation is computed under each method. Final Questions Review the depreciation schedules on the Patterson Planning Corp. panel, then answer the following questions. 1. How would you adjust Schedule B if, at the beginning of Year 3, the asset was estimated to have 5 more years of life remaining, but with a residual value that was $3,000 higher? The total depreciation for this asset now will be $fill in the blank d05778013fc805c_1. The depreciation amount for Year 3 will be $fill in the blank d05778013fc805c_2.
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.
Mastery Problem: Long-Term Assets: Fixed and Intangible
Patterson Planning Corp.,
You have been hired by Patterson Planning Corp., an events planning company that recently had a fire in which some of the accounting records were damaged.
In reviewing the fixed asset records, you find three
| Year | Schedule A | Schedule B | Schedule C | ||||||
| 1 | $10,000 | $10,125 | $8,800 | ||||||
| 2 | 6,000 | 13,500 | 6,600 | ||||||
| 3 | 3,600 | 13,500 | 7,480 | ||||||
| 4 | 2,160 | 13,500 | 6,600 | ||||||
| 5 | 740 | 3,375 | 4,400 | ||||||
| 6 | 7,040 | ||||||||
| 7 | 4,840 | ||||||||
| 8 | |||||||||
| Total | $22,500 | $54,000 | $45,760 |
Depreciation
1. Determine which depreciation method is shown in each schedule on the Patterson Planning Corp. panel. Then match each schedule to the asset description that best characterizes the type of assets often depreciated using that method.
| Asset Description | Depreciation Schedule Used | ||
| Asset producing steady revenues | B | ||
| Asset with variable in-service time | C | ||
| Asset generating greater revenues in the early years | A |
2. For each of the depreciation schedules shown on the Patterson Planning Corp., fill in the following information. If an amount box does not require an entry, leave it blank.
| A | B | C | |||||||
| Useful life | fill in the blank 12a1f2fe3ffb07c_1 | fill in the blank 12a1f2fe3ffb07c_2 | fill in the blank 12a1f2fe3ffb07c_3 | ||||||
| Residual value | $fill in the blank 12a1f2fe3ffb07c_4 | $fill in the blank 12a1f2fe3ffb07c_5 | $fill in the blank 12a1f2fe3ffb07c_6 | ||||||
| Asset cost | $fill in the blank 12a1f2fe3ffb07c_7 | $fill in the blank 12a1f2fe3ffb07c_8 | $fill in the blank 12a1f2fe3ffb07c_9 | ||||||
| Total operating hours | fill in the blank 12a1f2fe3ffb07c_10 | fill in the blank 12a1f2fe3ffb07c_11 | fill in the blank 12a1f2fe3ffb07c_12 |
Think about how depreciation is computed under each method.
Final Questions
Review the depreciation schedules on the Patterson Planning Corp. panel, then answer the following questions.
1. How would you adjust Schedule B if, at the beginning of Year 3, the asset was estimated to have 5 more years of life remaining, but with a residual value that was $3,000 higher?
The total depreciation for this asset now will be $fill in the blank d05778013fc805c_1. The depreciation amount for Year 3 will be $fill in the blank d05778013fc805c_2.
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