184)
Compare the different depreciation methods (straight-line, units-of-production, and
double-declining-balance) with respect to the amounts of depreciation expense per period and the
total depreciation over the life of the asset.
185)
Explain how to calculate total asset turnover. Describe what it reveals about a company’s financial
condition, whether a higher or lower ratio is desirable, and how it is best applied for comparative
purposes.
186)
How is the cost principle applied to plant asset acquisitions, including lump-sum purchases?
187)
Explain in detail how to compute each of the following depreciation methods: straight-line,
units-of-production, and double-declining-balance.
188)
Explain the difference between revenue expenditures and capital expenditures and how they are
recorded in the accounting system.
189)
What are the general accounting procedures for recording asset disposals?
190)
Describe the accounting for natural resources, including their acquisition, cost allocation, and
account titles.
191)
Describe the accounting for intangible assets, including their acquisition, cost allocation, and
accounts involved.
192)
A company’s property records revealed the following information about its plant assets:
Machine
No.
Cost
Salvage
Value
Purchase
Date
Estimated
Life
1
$42,000
$3,000
10/1
3 years
2
86,000
8,600
7/01
5 years
Calculate the depreciation expense for each machine in Year 1 and Year 2 for the year ended
December 31.
Machine 1:
Year 1______________________ Year 2 _______________________
Machine 2:
Year 1 ______________________ Year 2 _______________________
193)
A company’s property records revealed the following information about its plant assets:
Machine
No.
Cost
Salvage
Value
Purchase
Date
Estimated
Life
1
$82,000
$8,000
1/01
4 years
2
46,000
3,600
7/01
5 years
Calculate the depreciation expense for each machine in Year 1 and Year 2 for the year ended
December 31.
Machine 1:
Year 1______________________ Year 2 _______________________
Machine 2:
Year 1 ______________________ Year 2 _______________________
194)
A company’s property records revealed the following information about one of its plant assets:
Cost
Salvage
Value
Purchase
Date
Estimated
Life
Depreciation Method
$450,000
$30,000
10/01
7 years
Straight-line
Calculate the depreciation expense for the asset in Year 1 and Year 2 for the year ended December
31.
Year 1______________________ Year 2 _______________________
195)
A company’s property records revealed the following information about one of its plant assets:
Cost
Salvage
Value
Purchase
Date
Estimated
Life
Depreciation Method
154,000
15,000
01/01
10 years
Double-declining balance
Calculate the depreciation expense in Year 1 and Year 2 for the year ended December 31.
Year 1 ______________________ Year 2 _______________________
196)
A company purchased a delivery van on October 1 of the current year at a cost of $40,000. The van
is expected to last six years and has a salvage value of $2,200. The company’s annual accounting
period ends on December 31.
1. What is the depreciation expense for the current year, assuming the straight-line method is used?
2. What is the book value of the van at the end of the first year?
197)
A building was purchased for $370,000 and depreciated for ten years on a straight-line basis under
the assumption it would have a twenty-year life and a $10,000 salvage value. At the beginning of
the building’s eleventh year it was recognized the building had eight years of remaining life instead
of ten and that at the end of the remaining eight years its salvage value would be $16,000. What
amount of depreciation should be recorded in each of the building’s remaining eight years?
198)
Greene Company purchased a machine for $75,000 that was expected to last 6 years and to have a
salvage value of $6,000. At the beginning of the machine’s fourth year the company decided that
the estimated useful life should be revised to a total of 10 years instead of 6 years. Also, the salvage
value was re-estimated to be $5,500. Straight-line depreciation was used throughout the machine’s
life. Calculate the depreciation expense for the fourth year of the machine’s useful life.
199)
On April 1 of the current year, a company purchased and placed in service a machine with a cost of
$240,000. The company estimated the machine’s useful life to be four years or 60,000 units of output
with an estimated salvage value of $60,000. During the current year, 12,000 units were produced.
Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year
assuming the company uses:
a. The straight-line method of depreciation
b. The units-of-production method of depreciation
c. The double-declining balance method of depreciation
200)
On September 30 of the current year, a company acquired and placed in service a machine at a cost
of $700,000. It has been estimated that the machine has a service life of five years and a salvage
value of $40,000. Using the double-declining-balance method of depreciation, complete the
schedule below showing depreciation amounts for all six years (round answers to the nearest
dollar). The company closes its books on December 31 of each year.
201)
On April 1, Year 1, Astor Corp. purchased and placed a plant asset in service. The following
information is available regarding the plant asset:
Acquisition cost $130,000
Estimated salvage value $15,000
Estimated useful life 5 years
Make the necessary adjusting journal entries at December 31, Year 1, and December 31, Year 2 to
record depreciation for each year under the straight-line depreciation method.
202)
On April 1, Year 1, Raines Co. purchased and placed a plant asset in service. The following
information is available regarding the plant asset:
Acquisition cost $130,000
Estimated salvage value $15,000
Estimated useful life 5 years
Make the necessary adjusting journal entries at December 31, Year 1, and December 31, Year 2 to
record depreciation for each year under the double-declining balance depreciation method:
203)
On January 1, Year 1, Naples purchased a computer system that cost $1,480,000. The estimated
useful life of the computer is 3 years and salvage value is $40,000. Straight-line depreciation is to
be used. On January 1, Year 2, Naples determined that the estimated useful life of the computer
would be 4 years instead of 3 years. The estimated salvage value will only be $10,000.
Prepare the journal entry to record depreciation expense for Year 1.
Prepare the journal entry to record depreciation expense for Year 2.
204)
The Oberon Company purchased a delivery truck for $95,000 on January 2. The truck was
estimated to have a $3,000 salvage value and a 4 year life. The truck was depreciated using the
straight-line method. At the beginning of the third year, it was obvious that the truck’s total useful
life would be 6 years rather than 4, and the salvage at the end of the 6th year would be $1,500.
Determine the depreciation expense for the truck for the 6 years of its life.
Year
Depreciation expense
1
2
3
4
5
6
205)
McClintock Co. had the following transactions involving plant assets during Year 1. Unless
otherwise indicated, all transactions were for cash.
Jan. 2 Purchased a truck for $70,000 plus sales taxes of $3,000. The truck is expected to have a
$14,000 salvage value and a 4 year life.
Jan. 3 Paid $2,500 to have the company’s logo painted on the truck. This did not change the
truck’s salvage value.
Dec. 31 Recorded straight-line depreciation on the truck.
Prepare the general journal entries to record these transactions.
206)
In year one, McClintock Co. acquired a truck that cost $75,500 with an estimated $14,000 salvage
value and 4 year estimated useful life. Depreciation in the first year was $15,375. McClintock had
the following transactions involving plant assets during Year 2. Unless otherwise indicated, all
transactions were for cash.
Jan. 5 Paid $5,000 to put a new engine in the truck that is expected to make the truck run more
efficiently and increase the truck’s useful life by one year. The salvage value did not change.
Mar. 1 Paid $2,000 to replace a broken tailgate that was damaged when a heavy carton was
inadvertently dropped on it.
Dec. 31 Recorded straight-line depreciation on the truck.
Prepare the general journal entries to record these transactions.
207)
A company purchased a cooling system on January 2 for $225,000. The system had an estimated
useful life of 15 years. After using the system for 13 full years, the company completed a
renovation of the system at a cost of $33,000 and now expects the system to be more efficient and
last 8 years beyond the original estimate. The company uses the straight-line method of
depreciation.
(a) Prepare the journal entry at January 3, to record the renovation of the cooling system.
(b) Prepare the journal entry at December 31, to record the revised depreciation for the thirteenth
year.
208)
A company purchased and installed equipment on January 1 at a total cost of $72,000. Straight-line
depreciation was calculated based on the assumption of a five-year life and no salvage value. The
equipment was disposed of on July 1 of the fourth year. The company uses the calendar year.
1. Prepare the general journal entry to update depreciation to July 1 in the fourth year.
2. Prepare the general journal entry to record the disposal of the equipment under each of these three
independent situations:
a. The equipment was sold for $22,000 cash.
b. The equipment was sold for $15,000 cash.
c. The equipment was totally destroyed in a fire and the insurance company settled the claim for
$18,000 cash.
209)
A company purchased and installed machinery on January 1 at a total cost of $93,000. Straight-line
depreciation was calculated based on the assumption of a five-year life and no salvage value. The
machinery was disposed of on July 1 of year four. The company uses the calendar year.
1. Prepare the general journal entry to update depreciation to July 1 in year four.
2. Prepare the general journal entry to record the sale of the machine for $27,000 cash.
210)
On April 1, Year 5 a company discarded a machine that had cost $10,000 and had accumulated
depreciation of $8,000 as of December 31, Year 4. The asset had a 5-year life and no salvage value.
Prepare the journal entries to record the updating of the depreciation expense and discarding of this
asset in Year 5.
211)
On January 1, 2016, a company disposed of equipment for $16,200 cash that had cost $35,000, a
salvage value of $5,000, and a useful life 10 years. The double-declining-balance depreciation
method was used. On December 31, 2015, accumulated depreciation was $20,664. Prepare a
journal entry to record the disposal of the equipment.
212)
On January 2, 2010, a company purchased a delivery truck for $45,000 cash. The truck had an
estimated useful life of seven years and an estimated salvage value of $3,000. The straight-line
method of depreciation was used. Prepare the journal entries to record depreciation expense and the
disposition of the truck on September 1, 2014, under each of the following assumptions:
a. The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price
of $60,000. This transaction has commercial substance.
b. The truck and $40,000 cash were exchanged for a new delivery truck that had a cash price of
$60,000. This transaction has commercial substance.
213)
A company had net sales of $230,000 for 2015 and $288,000 for 2016. The company’s average
total assets for 2015 were $150,000 and $180,000 for 2016. Calculate the total asset turnover for
each year and comment on the company’s efficiency in the use of its assets.
214)
A company had net sales of $1,540,500 in 2015 and $1,495,000 in 2016. Its average assets were
$810,000 for 2015 and $800,000 for 2016. (1) Calculate the total asset turnover for each year. (2)
Interpret and comment on the company’s efficiency in the use of its assets.