Intermediate Accounting, Student Value Edition (2nd Edition)
2nd Edition
ISBN: 9780134732145
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 21, Problem 21.7BE
To determine
To prepare: The
Given information:
Original cost of the asset is $750,000.
Residual value is $50,000.
Estimated life years are 20 years.
The residual value is reduced to $30,000.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Buch Corporation purchased Machine Z at the beginning of Year 1 at a cost of $100,000. The machine is used in the production of Product X. The machine is expected to have a useful life of 10 years and no residual value. The straightline method of depreciation is used. Adverse economic conditions develop in Year 3 that result in a significant decline in demand for Product X. At December 31, Year 3, the company develops the following estimates related to Machine Z:
Expected future cash flow
$75,000
Present value of expected future cash flows
$55,000
Selling price
$70,000
Costs of disposal
$7,000
At the end of Year 5, Buch’s management determines that there has been a substantial improvement in economic conditions resulting in a strengthening of demand for Product X. The following estimates related to Machine Z are developed at December 31, Year 5:
Expected future cash flow
$70,000
Present value of expected future cash flows
$53,000
Selling…
Warren Company plans to depreciate a new building using the double declining-balance depreciation method. The building cost $800,000. The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years. Assuming the first year's depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year?
Group of answer choices
A)$30,720
B)$32,000
c)$58,880
D)$64,000
Atomic Corporation has a June 30th year end. It has used straight line depreciation on its reactor since its purchase for $912,800 January 1, 2018 based on expectations of a ten year life. No salvage value was estimated. At the beginning of the fiscal year of July 1st, 2022 , management realized that that the reactor life was in reality only 4 years. This is considered a change in accounting estimate and you are asked to solve it.
Required 1: What is the amount of Depreciation Expense reported for the year ended June 30th, 2022? $
Required 2: What is the amount of Depreciation Expense to be reported for the year ended June 30th, 2023? $
Required 3: What is the amount of Accumulated Depreciation that is retroactively recognized on July 1st 2022 when the remaining useful life is re-estimated? $
Required 4: What is the Net Book Value of the reactor on June 30th, 2022? $
Required 5: What is the Net Book Value of the reactor on December 31st, 2022? $
Required 6: What is the Net…
Chapter 21 Solutions
Intermediate Accounting, Student Value Edition (2nd Edition)
Ch. 21 - Are accounting changes permitted in financial...Ch. 21 - How do firms report accounting changes under the...Ch. 21 - Prob. 21.3QCh. 21 - How do firms account for changes in accounting...Ch. 21 - Prob. 21.5QCh. 21 - Prob. 21.6QCh. 21 - Prob. 21.7QCh. 21 - Prob. 21.8QCh. 21 - Do accounting errors that self-correct within two...Ch. 21 - Does a firm need to correct an error that...
Ch. 21 - Prob. 21.1MCCh. 21 - Prob. 21.2MCCh. 21 - Prob. 21.3MCCh. 21 - Prob. 21.4MCCh. 21 - Prob. 21.5MCCh. 21 - Prob. 21.1BECh. 21 - Prob. 21.2BECh. 21 - Prob. 21.3BECh. 21 - Prob. 21.4BECh. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.6BECh. 21 - Prob. 21.7BECh. 21 - Prob. 21.8BECh. 21 - Prob. 21.9BECh. 21 - Prob. 21.10BECh. 21 - Prob. 21.11BECh. 21 - Prob. 21.12BECh. 21 - Prob. 21.13BECh. 21 - Prob. 21.14BECh. 21 - Change in Accounting Principle, Inventory. Massi...Ch. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.3ECh. 21 - Change in Accounting Principle, Inventory. Winthur...Ch. 21 - Prob. 21.5ECh. 21 - Prob. 21.6ECh. 21 - Error Analysis and Correction. Feinstein and...Ch. 21 - Prob. 21.8ECh. 21 - Prob. 21.9ECh. 21 - Prob. 21.10ECh. 21 - Change in Accounting Principle, Inventory. Second...Ch. 21 - Prob. 21.2PCh. 21 - Prob. 21.3PCh. 21 - Prob. 21.4PCh. 21 - Prob. 21.5PCh. 21 - Change in Estimate, Inventory, Bad Debt Expense....Ch. 21 - Prob. 21.7PCh. 21 - Cases Judgment Case Judgment Case: Materiality and...Ch. 21 - Prob. 1FSCCh. 21 - Surfing the Standards: Change in Accounting...Ch. 21 - Prob. 1BCC
Knowledge Booster
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.Similar questions
- On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.arrow_forwardUrquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the assets life, and create the journal entry for year eleven.arrow_forwardIMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, Dans Demolition purchased two jackhammers for 2,500 each with a salvage value of 100 each and estimated useful lives of four years. On January 1, 20-2, a stronger blade to improve performance was installed in Jackhammer A for 800 cash and the compressor was replaced in Jackhammer B for 200 cash. The compressor is expected to extend the life of Jackhammer B one year beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Jackhammers A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each jackhammer for 20-2 through 20-4.arrow_forward
- Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.arrow_forwardOn August 3,Cinco construction purchased special-purpose equipment at a cost of$9,139,000. The useful life of the equipment was estimated to be eight years,with an estimated residual value of $34,300. what is the depreciation expense to be recognized each calenders year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense?arrow_forwardEquipment with a cost of $446,900 has an estimated residual value of $51,400, has an estimated useful life of 35 years, and is depreciated by the straight-line method. a. Determine the amount of the annual depreciation. b. Determine the book value at the end of the 20 full years of use. c. Assuming that at the start of the year 21 the remaining life is estimated to be 22 years and the residual value is estimated to be $53,700, determine the depreciation expense for each of the remaining 22 years.arrow_forward
- The Donut Stop acquired equipment for $19,000. The company uses straight-line depreciation and estimates a residual value of $3,000 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,200 from the original estimate of $3,000.Required:Calculate how much The Donut Stop should record each year for depreciation in years 3 to 6.arrow_forwardExplain why fixed assets are depreciated. A patent is purchased at a cost of $100,000, and the buyer expects the useful life to be 20 years. What is the adjusting entry needed at year-end? What is the reasoning of using the declining balance method? A delivery truck that costs $40,000 has a residual value of $8,000 and a useful life of 160,000 miles and the truck was driven 20,000 miles that year. Calculate the first year’s depreciation. What is the book value of the truck at the end of the first year?arrow_forwardA construction company is considering changing its depreciation from the MACRS method to the historical SL method for a general purpose hauling truck. The cost basis of the truck is $100,000, and the expected salvage value for depreciation purposes is $8,000. The company will use the truck for eight years and will depreciate it over this period of time with the SL method.What is the difference in the amount of depreciation that would be claimed in year five (i.e., MACRS versus SL)?arrow_forward
- An asset was purchased by XYZ company for 750,000. It had an estimated residual value of 150,000 and an estimated useful life of 10 years. After 5 years of use, the estimated residual value is revised to 120,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in year 6 would be _____________________.arrow_forwardThe Donut Stop acquired equipment for $18,000. The company uses straight-line depreciation and estimates a residual value of $3,600 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,500 from the original estimate of $3,600. Required: Calculate how much The Donut Stop should record each year for depreciation in years 3 to 6.arrow_forwardThe Donut Stop acquired equipment for $26,000. The company uses straight-line depreciation and estimates a residual value of $4,000 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,600 from the original estimate of $4,000. Required: Calculate how much The Donut Stop should record each year for depreciation in years 3 to 6. Annual depreciation in Years 3 to 6arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
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