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
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 4P: Cost of Asset and Depreciation Method Heist Company purchased a machine on January 2, 2019, and uses...
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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.
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Complete part d
Transcribed Image Text: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
Transcribed Image Text: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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