FINANCIAL ACCT.FUND.(LOOSELEAF)
FINANCIAL ACCT.FUND.(LOOSELEAF)
7th Edition
ISBN: 9781260482867
Author: Wild
Publisher: MCG
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Chapter 8, Problem 3PSB
To determine

Depreciation:

Depreciation is the amount of decrease in the value of an asset within a set time period due to wear and tear of that particular asset. It helps in readjusting the actual cost of the particular asset o which the depreciation is applied.

Straight Line Depreciation:

Straight line depreciation is one of the methods of depreciation in which fixed rate of depreciation is provided throughout the course of depreciation on a particular asset.

To prepare: A table and to allocate the cost.

Expert Solution
Check Mark

Explanation of Solution

Prepare table to show allocation of cost:

    DetailsLand($)Building 2($)Building 3($)Land Improvement B($)Land Improvement C($)
    Purchase Price868,000527,000155,000
    Demolition122,200
    Land grading174,500
    New Building1,458,000
    New Improvement103,500
    Total1,164,500527,0001,458,000155,000103,500

Table (1)

Working Notes:

Computation of total appraised value:

  

  Totalappraisedvalue=( Appraisedvalueofland +AppraisedValueofBuilding +AppraisedvalueofLandimprovement1)=$795,200+$482,400+$142,000=$1,420,000.

Total appraised value is $1,420,000.

Land

Computation of percentage of land of the total appraised value:

  Percentageofland=AppraisedvalueoflandTotalappraisedvalue×100=$795,200$1,420,000×100=52%

Percentage of land is 52%.

Apportioned cost

Computation of apportioned cost:

  Apportionedcost=Cashactuallypaid×Percentageofland=$1,550,000×52%=$868,000

Apportioned cost of land is $868,000.

Building B

Computation of percentage of building of the total appraised value:

  Percentageofbuilding=AppraisedvalueofbuildingTotalappraisedvalue×100=$482,800$1,420,000×100=34%

Percentage of building is 34%.

Apportioned cost

  Apportionedcost=Cashactuallypaid×Percentageofbuilding=$1,550,000×23%=$527,000

Apportioned cost of building is $527,000.

Land Improvements B

Computation of percentage of land improvements 1 of the total appraised value:

  PercentageoflandimprovementB=( AppraisedvalueoflandimprovementB Totalappraisedvalue   ×100)=$142,000$1,420,000×100=10%

Percentage of land improvement B is 10%.

Apportioned cost

Computation of apportioned cost:

  Apportionedcost=Cashactuallypaid×PercentageoflandimprovementB=$1,550,000×10%=$155,000

Apportioned cost of land improvement B is $155,000.

2.

To determine

To prepare: Journal Entry.

2.

Expert Solution
Check Mark

Explanation of Solution

Record the entry for purchase of assets.

    DateAccount Title and ExplanationPost refDebit($)Credit($)
    Land1,164,500
    Building B527,000
    Building C1,458,000
    Land improvements B155,000
    Land improvements C103,500
    Cash3,408,000
    (To record the purchase of assets)

Table (2)

  • Building is an asset account. Building account increases as the new building has been purchased; hence all the assets are debited as they increases in value.
  • Land is an asset account. Land account increases as a new land is purchased and all the assets are debited as a new asset is purchased or if its value increases.
  • Vehicle account is an asset account. Vehicles account increases as a new vehicle is purchased and all the assets are debited as a new asset is purchased or if its value increases.
  • Land improvements are an asset account. Land improvement account increases as some improvements have been done on land to increase its useful life and all the assets are debited as their value increases.
  • Cash account is an asset account. Cash account decreases as the amount paid for the purchase of all assets are made in cash and all the assets are credited as their values decreases.

3.

To determine

To prepare: adjusting entries.

3.

Expert Solution
Check Mark

Explanation of Solution

Building B

Record depreciation on building B.

    DateAccount Title and ExplanationPost refDebit($)Credit($)
    Dec 31 2017Depreciation28,500
    Accumulated Depreciation28,500
    (To record the depreciation)

Table (3)

  • Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
  • Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of depreciation:

  Depreciation=( CostoftheassetResidualvalue)Usefullife=$527,000$99,50015=$28,500

Depreciation that will charge to building is $26,900.

Building C

Record depreciation on building C.

    DateAccount Title and ExplanationPost refDebit($)Credit($)
    Dec 31 2017Depreciation60,000
    Accumulated Depreciation60,000
    (To record the depreciation)

Table (4)

  • Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
  • Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of depreciation:

  Depreciation=( CostoftheassetResidualvalue)Usefullife=$1,458,000$258,00020=$60,000

Depreciation that will charge to building C is $60,000.

Land improvement B

To record entry for depreciation on Land improvement 1,

    DateAccount Title and ExplanationPost refDebit($)Credit($)
    Depreciation31,000
    Accumulated Depreciation31,000
    (To record the depreciation)

Table (5)

  • Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
  • Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of depreciation:

  Depreciation=( CostoftheassetResidualvalue)Usefullife=$155,0005=$31,000

Depreciation charged to improvement B is $31,000.

Land improvement C

To record depreciation on Land improvement 2,

    DateAccount Title and ExplanationPost refDebit($)Credit($)
    Depreciation10,350
    Accumulated Depreciation10,350
    (To record the depreciation)

Table (6)

  • Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
  • Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and is increasing as the depreciation is transferred to this account. This is the reason it is credited.

Working Notes:

Computation of depreciation:

  Depreciation=( CostoftheassetResidualvalue)Usefullife=$103,50010=$10,350

Depreciation that will charge to improvement C is $10,350.

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Chapter 8 Solutions

FINANCIAL ACCT.FUND.(LOOSELEAF)

Ch. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQCh. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 1QSCh. 8 - Prob. 2QSCh. 8 - Prob. 3QSCh. 8 - Prob. 4QSCh. 8 - Prob. 5QSCh. 8 - Prob. 6QSCh. 8 - Prob. 7QSCh. 8 - Prob. 8QSCh. 8 - Prob. 9QSCh. 8 - Prob. 10QSCh. 8 - Prob. 11QSCh. 8 - Prob. 12QSCh. 8 - Prob. 13QSCh. 8 - Prob. 14QSCh. 8 - Prob. 15QSCh. 8 - Prob. 16QSCh. 8 - Prob. 1ECh. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Prob. 7ECh. 8 - Prob. 8ECh. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Prob. 14ECh. 8 - Prob. 15ECh. 8 - Prob. 16ECh. 8 - Prob. 17ECh. 8 - Prob. 18ECh. 8 - Prob. 19ECh. 8 - Prob. 20ECh. 8 - Prob. 21ECh. 8 - Prob. 22ECh. 8 - Prob. 23ECh. 8 - Prob. 24ECh. 8 - Plant asset costs; depreciation methods C1 P1...Ch. 8 - Prob. 2PSACh. 8 - Prob. 3PSACh. 8 - Prob. 4PSACh. 8 - Prob. 5PSACh. 8 - Prob. 6PSACh. 8 - Prob. 7PSACh. 8 - Prob. 8PSACh. 8 - Plant asset costs; depreciation methods C1 P1 Nagy...Ch. 8 - Prob. 2PSBCh. 8 - Prob. 3PSBCh. 8 - Prob. 4PSBCh. 8 - Prob. 5PSBCh. 8 - Prob. 6PSBCh. 8 - Prob. 7PSBCh. 8 - Prob. 8PSBCh. 8 - Prob. 8SPCh. 8 - Prob. 1AACh. 8 - Prob. 2AACh. 8 - Comparative figures for Samsung, Apple, and Google...Ch. 8 - Prob. 1BTNCh. 8 - Prob. 2BTNCh. 8 - Prob. 3BTNCh. 8 - Prob. 4BTNCh. 8 - Review the chapter’s opening feature involving Deb...Ch. 8 - Prob. 6BTN
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