Chapter 11, Problem 11.9E

1.

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.

$\text{Depreciation cost = }\frac{\text{Cost of the asset-Salvage value}}{\text{Estimated useful life of the asset}}$

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.

$\text{Depreciation expense = }\frac{\text{Cost of the asset – Salvage value}}{\text{Estimated useful life of the asset}}$

To Calculate: The depreciation for the year 2016.

2.

To determine

To Prepare: The journal entry to record the revaluation of the equipment.

3.

To determine

To Calculate: The depreciation for the year 2017.

4.

To determine

To Prepare: The journal entry to record the revaluation of the equipment, assuming that the fair value of the equipment is $195,000.