Chapter 7, Problem 7.7AP

Compute depreciation, amortization, and book value of long-term assets (LO7–4, 7–5)

Solich Sandwich Shop had the following long-term asset balances as of December 31, 2018:

	Cost	Accumulated Depreciation	Book Value
Land	$ 95,000	–	$ 95,000
Building	460,000	$(165,600)	294,400
Equipment	235,000	(50,000)	185,000
Patent	250,000	(100,000)	150,000

 Solich purchased all the assets at the beginning of 2016 (3 wars ago). The building is depreciated over a 10-year service life using the double-declining-balance method and estimating no residual value. The equipment is depreciated over a nine-war useful life using the straight-line method with an estimated residual value of $10,000. The patent is estimated to have a five-war service life with no residual value and is amortized using the straight-line method Depreciation and amortization hose been recorded for 2016 and 2017.

  Required:

  1.    For the war ended December 31, 2018, record depreciation expense for buildings and equipment. Land is not depreciated

  2.    For the war ended December 31, 2018, record amortization expense for the patent.

  3.    Calculate the book value for each of the four long-term assets at December 31, 2018.