Complete part d PROBLEM 9.3A Issues Involving Alternative Depreciation Methods O LO9-1, L LO9-2, O LO9-3, LO9-5Hills Hardware purchased new shelving for its store on April 1, 2021. The shelving is expected to have a 20-year life and noresidual value. The following expenditures were associated with the purchase.Cost of the shelvingFreight chargesSales taxes$12,000520780Installation of shelvingCost to repair shelf damaged during installation2,700400 Instructionsa. Compute depreciation expense for the years 2021 through 2024 under each depreciation method listed as follows.1. Straight-line, with fractional years rounded to the nearest whole month.2. 200 percent declining-balance, using the half-year convention.3. 150 percent declining-balance, using the half-year convention.b. Hills Hardware has two conflicting objectives. Management wants to report the highest possible earnings in its financialstatements, yet it also wants to minimize its taxable income reported to the IRS. Explain how both of these objectives can bemet.c. Which of the depreciation methods applied in part a will result in the lowest reported book value at the end of 2024? Isbook value an estimate of an asset's fair value? Explain.d. Assume that Hills Hardware sold the old shelving that was being replaced. The old shelving had originally cost $9,000. Itsbook value at the time of the sale was $400. Record the sale of the old shelving under the following conditions.1. The shelving was sold for $1,100 cash.2. The shelving was sold for $175 cash.

Depreciation indicates the fall in the historical amount of the asset representing the damage take…

PROBLEM 9.3A Issues Involving Alternative Depreciation Methods O LO9-1, LO9-2, LO9-3, L09-5 Hills Hardware purchased new shelving for its store on April 1, 2021. The shelving is expected to have a 20-year life and no residual value. The following expenditures were associated with the purchase. Cost of the shelving Freight charges $12,000 520 Sales taxes 780 Installation of shelving Cost to repair shelf damaged during installation 2,700 400

PROBLEM 9.3A Issues Involving Alternative Depreciation Methods O LO9-1, LO9-2, LO9-3, L09-5 Hills Hardware purchased new shelving for its store on April 1, 2021. The shelving is expected to have a 20-year life and no residual value. The following expenditures were associated with the purchase. Cost of the shelving Freight charges $12,000 520 Sales taxes 780 Installation of shelving Cost to repair shelf damaged during installation 2,700 400

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 43E

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Concept explainers

Bad Debts

At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.

Accounts Receivable

The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.

Question

Complete part d

PROBLEM 9.3A Issues Involving Alternative Depreciation Methods O LO9-1, L LO9-2, O LO9-3, LO9-5
Hills Hardware purchased new shelving for its store on April 1, 2021. The shelving is expected to have a 20-year life and no
residual value. The following expenditures were associated with the purchase.
Cost of the shelving
Freight charges
Sales taxes
$12,000
520
780
Installation of shelving
Cost to repair shelf damaged during installation
2,700
400

Instructions
a. Compute depreciation expense for the years 2021 through 2024 under each depreciation method listed as follows.
1. Straight-line, with fractional years rounded to the nearest whole month.
2. 200 percent declining-balance, using the half-year convention.
3. 150 percent declining-balance, using the half-year convention.
b. Hills Hardware has two conflicting objectives. Management wants to report the highest possible earnings in its financial
statements, yet it also wants to minimize its taxable income reported to the IRS. Explain how both of these objectives can be
met.
c. Which of the depreciation methods applied in part a will result in the lowest reported book value at the end of 2024? Is
book value an estimate of an asset's fair value? Explain.
d. Assume that Hills Hardware sold the old shelving that was being replaced. The old shelving had originally cost $9,000. Its
book value at the time of the sale was $400. Record the sale of the old shelving under the following conditions.
1. The shelving was sold for $1,100 cash.
2. The shelving was sold for $175 cash.

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