INTERMEDIATE ACCT.-CONNECT PLUS ACCESS
INTERMEDIATE ACCT.-CONNECT PLUS ACCESS
8th Edition
ISBN: 9780077832810
Author: J. David Spiceland and James Sepe and Mark Nelson and Wayne Thomas
Publisher: McGraw Hill
bartleby

Concept explainers

bartleby

Videos

Textbook Question
Book Icon
Chapter 11, Problem 11.5E

Depreciation methods; solving for unknowns

• LO11–2

For each of the following depreciable assets, determine the missing amount (?). Abbreviations for depreciation methods are SL for straight line, SYD for sum-of-the-years’-digits, and DDB for double-declining balance.

Chapter 11, Problem 11.5E, Depreciation methods; solving for unknowns  LO112 For each of the following depreciable assets,

Expert Solution & Answer
Check Mark
To determine

Depreciation:

Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life. The following is the formula to calculate the depreciation.

Depreciation cost = Cost of the asset-Salvage valueEstimated useful life of the asset

To determine:  The missing amounts.

Explanation of Solution

Asset A:

 In the given case cost of the asset is missing. Given information is residual value $20,000; service life 5 years, depreciation method: double declining balance method and depreciation in year 2 is $24,000.

Double declining balance (DDB) method:

In this method of depreciation, the depreciation is calculated by multiply beginning of year book value, not depreciable base, by an annual rate that is a multiple of the straight line rate.

Depreciation expense=(Beginingvalueoftheasset)×(Straightlinerateofdepreciation × 2)

Determine cost of the asset.

$24,000=(Beginingvalueoftheasset A at year 2)×(15 × 2)Beginingvalueoftheasset A at year 2}=$24,000×52Beginingvalueoftheasset A at year 2}=$60,000

Beginning value of the asset A at year 1 is calculated as follows:

Cost at year 1((costat year 1)×15×2)=$60,000Cost at year 10.4costatyear1=$60,0000.6cost at year 1=$60,000cost at year 1 = $60,0000.6costatyear1=$100,000

Hence, cost at year 1 is $100,000.

Asset B:

In given case residual value is missing. Given information is cost of the asset B is $40,000; service life is 8 years; depreciation method is sum of the year’s digit method; depreciation in year 2 is $7,000.

Sum-of- the-years’ digits (SYD) method:

Sum-of-the years’ digits method determines the depreciation expense by multiplying the depreciable base and declining fraction.

Determine the residual value of asset B

Depreciationexpense=Cost of the asset × (Number of years ofestimated life remaining at the beginning of the year)÷SYD

$7,000=($40,000residual value)×736$7,000×36=($40,000×7)(residual value×7)$252,000=$280,000(residual value×7)residual value=$280,000$252,0007Residual value =$4,000

Working note:

SYD=n(n+1)2=8(8+1)2=36

Conclusion:

Hence, the residual value of the asset B is $4,000.

Asset C:

In the given case for asset C, estimated life is missing. Given information is as follows cost of the asset is $65,000; residual value of the asset is $5,000; depreciation method is straight line method and year 2 depreciation is $6,000.

Straight line method:

Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.

Determine estimated life of the asset C

Depreciation expense = (Cost of the asset-Salvage value)Estimated useful life of the asset

$6,000=($65,000$5,000)estimated life$6,000×estimated life =$60,000Estimated life = $60,000$6,000Estimated life = 10years

Hence, estimated life or service life of the asset C is 10 Years.

Asset D:

In the given case, method of depreciation is missing. Given information is as follows: cost of the asset D is $230,000; residual value of the asset D is $10,000; service life is 10 years; depreciation for year 2 is $22,000.

Determine the method of depreciation.

Depreciation expense=(costoftheasset-residualvalue)estimatedlifeoftheasset$22,000=($230,000$10,000)10years$22,000=$220,00010years$22,000=$22,000

Hence, straight line method of depreciation is used to determine the depreciation of asset D.

Asset E:

In the given situation depreciation for year 2 is missing. Given information is as follows: cost of the asset E $200,000; residual value of the asset E is $20,000; service life is 8 years; depreciation method is 150% declining method.

One hundred fifty percent declining balance:

In this method of depreciation, the depreciation is calculated by multiply beginning of year book value, not depreciable base, by an annual rate that is a 150% or 1.5 of the straight line rate.

Determine the depreciation on asset E for year 2.

Depreciation expense=(Beginingvalueoftheasset)×(Straightlinerateofdepreciation × 1.5)

Depreciation expense=($200,000)×(18 × 1.5)=$37,500

Depreciation on asset E for year 1 is $37,500

For year 2 depreciation expense is calculated as follows

Depreciation expense=($200,000$37,500)×(18 × 1.5)=$162,500×1.58=$30,469

Hence, depreciation expense for year 2 is $30,469.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 11 Solutions

INTERMEDIATE ACCT.-CONNECT PLUS ACCESS

Ch. 11 - Prob. 11.11QCh. 11 - Prob. 11.12QCh. 11 - What are some of the simplifying conventions a...Ch. 11 - Explain the accounting treatment required when a...Ch. 11 - Explain the accounting treatment and disclosures...Ch. 11 - Explain the steps required to correct an error in...Ch. 11 - Prob. 11.17QCh. 11 - Prob. 11.18QCh. 11 - Prob. 11.19QCh. 11 - Prob. 11.20QCh. 11 - Briefly explain the differences between U.S. GAAP...Ch. 11 - Under U.S. GAAP, litigation costs to successfully...Ch. 11 - Cost allocation At the beginning of its fiscal...Ch. 11 - Prob. 11.2BECh. 11 - Prob. 11.3BECh. 11 - Prob. 11.4BECh. 11 - Prob. 11.5BECh. 11 - Prob. 11.6BECh. 11 - Prob. 11.7BECh. 11 - Prob. 11.8BECh. 11 - Prob. 11.9BECh. 11 - Impairment; property, plant, and equipment LO118...Ch. 11 - Prob. 11.11BECh. 11 - IFRS; impairment; property, plant, and equipment ...Ch. 11 - Prob. 11.13BECh. 11 - Prob. 11.14BECh. 11 - IFRS; impairment; goodwill LO1110 IFRS Refer to...Ch. 11 - Subsequent expenditures LO119 Demmert...Ch. 11 - Prob. 11.1ECh. 11 - Prob. 11.2ECh. 11 - Prob. 11.3ECh. 11 - Prob. 11.4ECh. 11 - Depreciation methods; solving for unknowns LO112...Ch. 11 - Prob. 11.6ECh. 11 - Prob. 11.7ECh. 11 - Prob. 11.8ECh. 11 - Prob. 11.9ECh. 11 - Prob. 11.10ECh. 11 - Prob. 11.11ECh. 11 - Prob. 11.12ECh. 11 - Prob. 11.13ECh. 11 - E 11–14 Cost of a natural resource; depletion and...Ch. 11 - Prob. 11.15ECh. 11 - Prob. 11.16ECh. 11 - Prob. 11.17ECh. 11 - Prob. 11.18ECh. 11 - Prob. 11.19ECh. 11 - Prob. 11.20ECh. 11 - Prob. 11.21ECh. 11 - Prob. 11.22ECh. 11 - Impairment; property, plant, and equipment LO118...Ch. 11 - IFRS; impairment; property, plant, and equipment ...Ch. 11 - E 11–25 IFRS; Impairment; property, plant, and...Ch. 11 - Impairment; property, plant, and equipment LO118...Ch. 11 - Prob. 11.27ECh. 11 - Prob. 11.28ECh. 11 - Prob. 11.29ECh. 11 - FASB codification research LO118 The FASB...Ch. 11 - Prob. 11.31ECh. 11 - Subsequent expenditures LO119 Belltone Company...Ch. 11 - E11–33 IFRS; amortization; cost to defend a patent...Ch. 11 - Prob. 11.34ECh. 11 - Concept s; terminology LO111 through LO116, LO118...Ch. 11 - E11–36 Retirement and replacement...Ch. 11 - Prob. 1CPACh. 11 - LO11–2 2. Calculate depreciation for year 2 based...Ch. 11 - Prob. 3CPACh. 11 - Prob. 4CPACh. 11 - Prob. 5CPACh. 11 - Prob. 6CPACh. 11 - Prob. 7CPACh. 11 - Prob. 8CPACh. 11 - Prob. 9CPACh. 11 - Prob. 10CPACh. 11 - Prob. 11CPACh. 11 - Prob. 12CPACh. 11 - Prob. 13CPACh. 11 - Prob. 14CPACh. 11 - Prob. 1CMACh. 11 - Prob. 2CMACh. 11 - Prob. 3CMACh. 11 - P 11–1 Depreciation methods; change in...Ch. 11 - Prob. 11.2PCh. 11 - Prob. 11.3PCh. 11 - Prob. 11.4PCh. 11 - Prob. 11.5PCh. 11 - Prob. 11.6PCh. 11 - Prob. 11.7PCh. 11 - Prob. 11.8PCh. 11 - Prob. 11.9PCh. 11 - Prob. 11.10PCh. 11 - Prob. 11.11PCh. 11 - Prob. 11.12PCh. 11 - Prob. 11.13PCh. 11 - Analysis Case 111 Depreciation, depletion, and...Ch. 11 - Communication Case 112 Depreciation LO111 At a...Ch. 11 - Judgment Case 113 Straight-line method; composite...Ch. 11 - Prob. 11.4BYPCh. 11 - Prob. 11.5BYPCh. 11 - Prob. 11.7BYPCh. 11 - Prob. 11.8BYPCh. 11 - Research Case 119 FASB codification; locate and...Ch. 11 - Prob. 11.10BYPCh. 11 - Prob. 11.11BYPCh. 11 - Prob. 11.13BYPCh. 11 - Prob. 11.14BYPCh. 11 - Real World Case 1115 Depreciation and depletion...Ch. 11 - Prob. 11.16BYPCh. 11 - Prob. 11.17BYP
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Accounting for Derivatives_1.mp4; Author: DVRamanaXIMB;https://www.youtube.com/watch?v=kZky1jIiCN0;License: Standard Youtube License
Depreciation|(Concept and Methods); Author: easyCBSE commerce lectures;https://www.youtube.com/watch?v=w4lScJke6CA;License: Standard YouTube License, CC-BY