Concept Introduction:
Double Declining balance method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method, the depreciation is calculated on the beginning book value of depreciation using a depreciation rate. The depreciation rate is calculated with the help of following formula:
Requirement-a:
To Calculate:
The amount of depreciation expense for the year 2017
Answer to Problem 6.27P
The amount of depreciation expense for the year 2017 is $90,000
Explanation of Solution
The amount of depreciation expense for the year 2017 is calculated as follows:
Year 2017 | Year 2016 | |
$ 240,000 | $ 150,000 | |
Depreciation for the year 2017 | $90,000 | |
(240000-150000) |
Concept Introduction:
Straight line method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
Double Declining balance method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method, the depreciation is calculated on the beginning book value of depreciation using a depreciation rate. The depreciation rate is calculated with the help of following formula:
Units of Production method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset is allocated on the basis of unit of production during its estimated life. The formula to calculate the deprecation under units of production method is as follows:
Requirement-b:
To Calculate:
- The original cost of the equipment
- Depreciation method being used
- Date of acquisition of the equipment
Answer to Problem 6.27P
- The original cost of the equipment = $420,000
- Depreciation method being used = Straight line depreciation
- Date of acquisition of the equipment = Apr. 2015
Explanation of Solution
Calculation of Original cost of the equipment: | ||
Year 2017 | Year 2016 | |
Equipment Book Value, net (A) | $ 180,000 | $ 270,000 |
Accumulated depreciation- Equipment (B) | $ 240,000 | $ 150,000 |
Original Cost of the equipment | $ 420,000 | $ 420,000 |
Identification of depreciation method: | ||
Year 2017 | Year 2016 | |
Accumulated depreciation- Equipment | $ 240,000 | $ 150,000 |
Depreciation for the year 2017 (240000-150000) | $90,000 | |
Straight line depreciation = (420000-60000)/4 years = | $90,000 | |
Calculation of date of acquisition: | ||
Accumulated depreciation till 2017 (A) | $ 240,000 | |
Straight line Annual depreciation (B) | $90,000 | |
Number of year from date of acquisition till Dec. 2017 (C) = (A/B) | 2.67 | |
Number of months from date of acquisition till Dec. 2017 (C*12) | 32 | |
Date of acquisition = Dec. 2017 - 32 months = | Apr. 2015 |
Concept Introduction:
Straight line method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:
Double Declining balance method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method, the depreciation is calculated on the beginning book value of depreciation using a depreciation rate. The depreciation rate is calculated with the help of following formula:
Units of Production method of depreciation: This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset is allocated on the basis of unit of production during its estimated life. The formula to calculate the deprecation under units of production method is as follows:
Requirement-c:
To Prepare:
The
Answer to Problem 6.27P
The journal entry for sale of the equipment is as follows:
Journal entries | |||
Date | Account Titles | Debit | Credit |
Dec. 31, 2017 | Cash | $ 141,600 | |
Accumulated depreciation- Equipment | $ 180,000 | ||
Loss on sale of equipment | $ 98,400 | ||
Equipment | $ 420,000 |
Explanation of Solution
The journal entry for sale of the equipment is explained as follows:
Journal entries | |||
Date | Account Titles | Debit | Credit |
Dec. 31, 2017 | Cash | $ 141,600 | |
Accumulated depreciation- Equipment | $ 180,000 | ||
Loss on sale of equipment (420000-180000-141600) | $ 98,400 | ||
Equipment | $ 420,000 | ||
(Being equipment sold for cash) |
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