Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Chapter 11, Problem 11.15E
E11-13 Depreciation Methods. Disposal. Kurtis Koal Company, Inc. purchased a new mining machine at a total cost of $900,000 on the first day of its fiscal year. The firm estimates that the machine has a useful life of 6 years or 6,000,000 tons of coal and a residual value of $60,000 at the end of its useful life. The following schedule indicates the actual number of tons of coal mined with the machine per year:
| Year | Tons of Coal |
| 1 | 700,000 |
| 2 | 1,400,000 |
| 3 | 1,600,000 |
| 4 | 1,000,000 |
| 5 | 750,000 |
| 6 | 550,000 |
Required
Prepare the depreciation schedules for the machine assuming that Kurtis Koal used the following methods (each case is independent):
- a. Straight-line method.
- b. Units-of-output method.
- c. Double-declining balance method. (Adjust the depreciation expense in the last year to the necessary amount to arrive at an ending book value equal to the scrap value.)
- d. Kurtis Koal sells the mining machine for $450,000 at the end of Year 3. What is the gain or loss on sale under each of the depreciation methods in parts (a)–(c)?
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Chapter 11 Solutions
Intermediate Accounting
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