Financial Accounting (5th Edition) (What's New in Accounting)
5th Edition
ISBN: 9780134727790
Author: Robert Kemp, Jeffrey Waybright
Publisher: PEARSON
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Textbook Question
Chapter 8, Problem 8SE
Refer to the data for S8-7. Compute second-year depreciation expense on the truck using the following methods:
- a. Straight-line
- b. Units-of-production
- c. Double-declining-balance
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Units-of-Activity Depreciation
A truck acquired at a cost of $202,800 has an estimated residual value of $18,000, has an estimated useful life of 440,000 miles, and was driven 113,000 miles during
the year. Determine the following. If required, round your answer for the depreciation rate to 2 decimal places.
a. The depreciable cost
b. The depreciation rate
per mile
c. The units-of-activity depreciation for the year
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E9-20 Computing depreciation-three methods
Learning Objective 2
1. Double-declining-balance, 12/31/19, Exp. $8,250
Crispy Fried Chicken bought equipment on January 2, 2018, for $33,000. The
equipment was expected to remain in service for four years and to operate for
6,750 hours. At the end of the equipment's useful life, Crispy's estimates that its
residual value will be $6,000. The equipment operated for 675 hours the first
year, 2,025 hours the second year, 2,700 hours the third year, and 1,350 hours the
fourth year.
Requirements
1. Prepare a schedule of depreciation expense, accumulated depreciation,
and book value per year for the equipment under the three depreciation
methods: straight-line, units-of-production, and double-declining-balance.
Show your computations. Note: Three depreciation schedules must be
prepared.
2. Which method tracks the wear and tear on the equipment most closely?
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Sale of Equipment
Equipment was acquired at the beginning of the year at a cost of $612,500. The equipment was depreciated using the straight-line method based on an estimated useful life of 9 years and an estimated residual value of $44,360.
a. What was the depreciation for the first year? Round your answer to the nearest cent.
b. Using the rounded amount from Part a in your computation, determine the gain(loss) on the sale of the equipment, assuming it was sold at the end of year eight for $102,987.
Round your answer to the nearest cent and enter as a positive amount.
c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. Round your answers to the nearest cent.
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Chapter 8 Solutions
Financial Accounting (5th Edition) (What's New in Accounting)
Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - What is depreciation, and why is it used in...Ch. 8 - Prob. 5DQCh. 8 - Which depreciation method would be moot...Ch. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ
Ch. 8 - Prob. 1SCCh. 8 - Prob. 2SCCh. 8 - How should a capital expenditure for a long-term...Ch. 8 - Which depreciation method usually produces the...Ch. 8 - Prob. 5SCCh. 8 - Prob. 6SCCh. 8 - Prob. 7SCCh. 8 - Prob. 8SCCh. 8 - Prob. 9SCCh. 8 - Prob. 10SCCh. 8 - Prob. 11SCCh. 8 - Prob. 12SCCh. 8 - Prob. 1SECh. 8 - Long-term asset terms (Learning Objective 1) 5-10...Ch. 8 - Prob. 3SECh. 8 - Lump-sum purchase (Learning Objective 2) 5-10 min....Ch. 8 - Errors in accounting for long-term assets...Ch. 8 - Concept of depreciation (Learning Objective 3)...Ch. 8 - Depreciation methods (Learning Objective 3) 10-15...Ch. 8 - Depreciation methods (Learning Objective 3) 10-15...Ch. 8 - Prob. 9SECh. 8 - Prob. 10SECh. 8 - Prob. 11SECh. 8 - Prob. 12SECh. 8 - Prob. 13SECh. 8 - Prob. 14SECh. 8 - Prob. 15SECh. 8 - Other long term assets (Learning Objective 8) 5-10...Ch. 8 - Prob. 17SECh. 8 - Prob. 18AECh. 8 - Prob. 19AECh. 8 - Prob. 20AECh. 8 - Prob. 21AECh. 8 - Depreciation methods (Learning Objective 3) 15-20...Ch. 8 - Prob. 23AECh. 8 - Prob. 24AECh. 8 - Prob. 25AECh. 8 - Prob. 26AECh. 8 - Prob. 27AECh. 8 - Prob. 28AECh. 8 - Prob. 29AECh. 8 - Prob. 30AECh. 8 - Prob. 31AECh. 8 - Prob. 32BECh. 8 - Prob. 33BECh. 8 - Prob. 34BECh. 8 - Prob. 35BECh. 8 - Prob. 36BECh. 8 - Prob. 37BECh. 8 - Prob. 38BECh. 8 - Prob. 39BECh. 8 - Prob. 40BECh. 8 - Prob. 41BECh. 8 - Prob. 42BECh. 8 - Prob. 43BECh. 8 - Prob. 44BECh. 8 - Prob. 45BECh. 8 - Long-term asset costs and partial-year...Ch. 8 - Journalizing long-term asset transactions...Ch. 8 - Prob. 48APCh. 8 - Prob. 49APCh. 8 - Prob. 50APCh. 8 - Prob. 51APCh. 8 - Prob. 52APCh. 8 - Prob. 53BPCh. 8 - Journalizing long-term asset transactions...Ch. 8 - Prob. 55BPCh. 8 - Prob. 56BPCh. 8 - Prob. 57BPCh. 8 - Prob. 58BPCh. 8 - Prob. 59BPCh. 8 - Prob. 1CECh. 8 - Prob. 1CPCh. 8 - Continuing Financial Statement Analysis Problem...Ch. 8 - Prob. 1EIACh. 8 - Prob. 2EIACh. 8 - Financial Analysis Purpose: To help familiarize...Ch. 8 - Prob. 1IACh. 8 - Prob. 1SBACh. 8 - Written Communication A client of yours notified...
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- Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciationmethods: straight-line,units-of-production, and double-declining-balance. Show your computations. Note: Three depreciation schedules must be prepared. Begin by preparing a depreciation schedule using thestraight-line method. Straight-Line Depreciation Schedule Depreciation for the Year Asset Depreciable Useful Depreciation Accumulated Book Date Cost Cost Life Expense Depreciation Value 1-2-2024 $30,000 $30,000 12-31-2024 $24,000 ÷ 4 years = $6,000 $6,000 24,000 12-31-2025 24,000 ÷ 4 years = 6,000 12,000 18,000 12-31-2026 24,000 ÷ 4 years = 6,000 18,000 12,000 12-31-2027 24,000 ÷ 4 years = 6,000 24,000 6,000 Before calculating the units-of-production depreciationschedule, calculate the…arrow_forwardE10-20 Computing depreciation three methods Learning Objective 2 1. Double-declining-balance, 12/31/17, Exp. $5,250 (Requirement 1 only) Crackling Fried Chicken bought equipment on January 2, 2016, for $21,000. The equipment was expected to remain in service for four years and to perform 3,600 fry jobs. At the end of the equipment's useful life, Crackling's estimates that its residual value will be $3,000. The equipment performed 360 jobs the first year, 1,080 the second year, 1,440 the third, and 720 the fourth year. Requirements 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods. Show your computations. Note: Three depreciation schedules must be prepared. 2. Which method tracks the wear and tear on the equipment most closely?arrow_forwardLearning Objectives 1, 3, 8: Report plant assets, depreciation, and investing cashflows) On January 1, 2018, Black Iron Bar & Grill purchased a building, paying $56,000cash and signing a $101,000 note payable. The company paid another $60,000 to remodel thebuilding. Furniture and fixtures cost $51,000, and dishes and supplies—a current asset—wereobtained for $9,600. All expenditures were for cash. Assume that all of these expendituresoccurred on January 1, 2018.Black Iron is depreciating the building over 25 years using the straight-line method, with anestimated residual value of $52,000. The furniture and fixtures will be replaced at the end of fiveyears and are being depreciated using the double-declining-balance method, with a residual valueof zero. At the end of the first year, the company still had dishes and supplies worth $1,600.Show what the company reported for supplies, plant assets, and cash flows at the end of thefirst year on its■ income statement,■ balance sheet, and■…arrow_forward
- #31arrow_forwardFINANCIAL ACCOUNTING DEPRECIATION YEAR TWO EXAM CHAPTER 7-9 DEPRECIABLE BASE COST Student Name: SALVAGE VALUE TYPE NAME HERE USEFUL LIFE SRTAIGHT LINE RATE OPERATING HOURS TOTAL COMPUTE YEAR TWO I HAVE COMPUTED YEAR ONE FOR YOU CURRENT OPERATING HOURS DOUBLE DECLINING RATE Equipment purchased at the beginning of the fiscal year for $360,000 is expected to have a useful life of 5 years, or 14,000 operating hours, and a residual value of $10,000. Compute the depreciation for the first and second years of use by each of the following methods: DEPRECIATION EXPENSE UNIT OF PRODUCTION RATE straight-line units-of-output (1,200 hours first year; 2,250 hours second year) double-declining-balance YEAR ONE YEAR TWO DOUBLE DOUBLE STRAIGHT UNITS OF DECLINING STRAIGHT UNITS OF DECLINING LINE PRODUCTION BALANCE LINE PRODUCTION BALANCEarrow_forwardQuestion 31arrow_forward
- To test your formulas, assume the machine purchased had an estimated useful life of three years (20,000, 30,000, and 50,000 hours, respectively). Enter the new information in the Data Section of the worksheet. Does your depreciation total 320,000 under all three methods? There are three common errors made by students completing this worksheet. Lets clear up two of them. One, an asset that has a three-year life should have no depreciation claimed in Year 4. This can be corrected using an =IF statement in Year 4. For example, the correct formula in cell C32 is =IF(B32D9,0,(D7D8)/D9) or =IF(B32D9, 0, SLN(D7, D8, D9)). You may wish to edit what you have already entered rather than retype it. Two, as mentioned in requirement 2, the double-declining-balance calculation needs to be modified in the last year of the assets life. Assuming you have already modified the formula for Year 4 (per instructions in step 2), alter the formula for Year 3 also. If you corrected any formulas, test their correctness by trying different estimated useful lives (between 3 and 8) in cell E9. Then reset the Data Section to the original values, save the revised file as DEPREC2, and reprint the worksheet to show the correct formulas. The third common error doesnt need to be corrected in this problem. The general form of the double-declining-balance formula needs to be modified to check the net book value of the asset each year to make sure it does not go below salvage value. =DDB does this automatically, but if you are writing your own formulas, this gets very complicated and is beyond the scope of the problem.arrow_forwardMANAGERIAL ACCOUNTING (You may use excel. RATE will be given. No long explanation needed) Show in tabular form (depreciation schedule) the computation for the depreciation expenses, accumulated depreciation, and book value per year for a machine worth Php 1,000,000 with a salvage value of 10% of the original cost and a depreciable life of 5 years using: a. declining balance method b. double declining balance method.arrow_forward[The following information applies to the questions displayed below.] Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years, or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product.arrow_forward
- Don't give answer in image formatarrow_forwardRequirement 1. For each depreciation method, prepare a depreciation schedule showing asset cost, depreciation expense, accumulated depreciation, and asset book value for each year of the asset's life. For the units of production method, round depreciation per unit to three decimal places. Before completing the straight-line depreciation schedule, calculate the straight-line depreciation rate. One year Useful life (SL) Depreciation rate - X 1 More Info - X Requirements Complete the Straight-Line Depreciation Schedule. Begin by filling out the schedule through 2019, and then complete the schedule by entering the amounts through 2022. On January 4, 2018, Bailey Enterprises, Inc., paid $205,600 for equipment used in manufacturing automotive supplies. In addition to the basic purchase price, the company paid $1,000 for transportation charges, $100 for insurance for the equipment while in transit, $10,500 sales tax, and $2,800 for a special which to place the equipment in the plant.…arrow_forwardCan you help me please? Thank youarrow_forward
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