184) The table below contains data on depreciation for equipment.
Required: Fill in the missing data in the table.
Acquisition Date
1/1/2016
1/1/2016
1/1/2016
1/1/2017
1/1/2017
Cost
$100,000
$100,000
$330,000
Accumulated
Depreciation1
2/31/2018
$90,000
Depreciation 2017
$10,000
$27,000
$200,000
Depreciation 2018
$10,000
$18,000
$80,000
Book value, 12/31/2017
$140,000
$37,000
$300,000
Book value, 12/31/2018
$70,000
Estimated service life
6
4
5
5
Estimated salvage value
0
$10,000
0
Depreciation method
Straight-line
Sum-of-
Years-Digits
Double-
declining balance
Acquisition Date
1/1/2016
1/1/2016
1/1/2016
1/1/2016
Cost
$100,000
$330,000
Accumulated
Depreciation,
12/31/2018
$90,000
Depreciation 2017
$10,000
$27,000
Depreciation 2018
$10,000
$18,000
$80,000
Book value,
12/31/2017
$37,000
Book value,
12/31/2018
$70,000
Estimated service life
5
Estimated salvage
value
0
$10,000
Depreciation method
line
Sum-of-
Years-Digits
balance
185) Cheney Company sold a 20-ton mechanical draw press (equipment) for $60,000. The old
draw press cost $77,000 and had a book value of $55,000.
Required:
Prepare the journal entry to record the disposition.
186) McLean Mfg. Company sold a three-speed lathe (equipment) for $24,000 cash. The lathe
cost $66,200 and had a book value of $23,200.
Required:
Prepare the journal entry to record the sale.
83
Use the following to answer the question(s) below:
In its 2018 annual report to shareholders, Buffalo Burgers Company, Inc. included the following
in a disclosure note:
E. Property, Plant and Equipment
Property, plant and equipment for the years ended December 28, 2018, and December 29, 2017,
consisted of the following ($ in thousands):
2018
2017
Machinery and plant equipment
$259,664
$183,828
Kegs
60,350
46,899
Land
23,260
24,515
Building and building improvements
44,234
36,667
Office equipment and furniture
14,581
12,580
Leasehold improvements
7,600
6,193
409,689
310,682
Less: accumulated depreciation
143,131
120,734
$266,558
$189,948
The Company recorded depreciation related to these assets of $23,565 thousand in the 2018
fiscal year.
Also, Buffalo Burgers reported the following information in the annual report ($ in thousands):
Years ended
12/28/2018
12/29/2017
Cash flows for investing
activities:
Purchases of property,
plant, and equipment
(100,655)
(66,010)
Proceeds on disposal of
property, plant, and equipment
18
41
187) Use a T-account to show the balances and changes during 2018 in Buffalo Burgers’
Property, Plant and Equipment account and its Accumulated depreciation–Property, Plant &
Equipment account.
188) Prepare the journal entry to record Buffalo Burgers’ sale of property, plant and equipment
during 2018.
85
Use the following to answer the question(s) below:
In its 2018 annual report to shareholders, Plank Breweries included the following note:
Property, Plant, and Equipment
Property, plant, and equipment consist of the following (in $ thousands):
December 31,
2018
2017
Brewery and retail
$ 14,465
$ 14,246
Equipment
Furniture and fixtures
918
772
Leasehold improvements
13,808
13,563
Construction in progress
584
165
Assets held for sale
________
4
29,775
28,750
Less accumulated depreciation
(9,555)
(7,625)
$ 20,220
$ 21,125
Total depreciation expense was approximately $2.121 million and $2.179 million for the years
ended December 31, 2018 and 2017, respectively.
Also, Plank Breweries reported the following information in its annual report (in $ thousands):
Years Ended December 31,
2018
2017
Acquisition of property, plant, and equipment
1,279
808
Proceeds from sale of property, plant, and
equipment
15
157
189) Required:
Use a T- account to show the balances and changes during 2018 in Plank Breweries:
Property, plant, and equipment account and Accumulated depreciation–Property, plant, and
equipment (PPE) account (in $ thousands).
190) Prepare the journal entry to record Plank’s disposal of the property, plant, and equipment
during 2018.
191) In its 2018 annual report to shareholders, Custard Cup Inc. included the following note:
Note 4 Property, Plant, and Equipment
Property, plant, and equipment (PPE) at December 31, 2018, and December 31, 2017, consisted
of the following:
2018
2017
(In millions)
Machinery and equipment
$244
$237
Buildings and
90
89
improvements
Office furniture and
6
6
fixtures
________
________
340
332
Less: Accumulated
depreciation and
183
165
Amortization
________
________
157
167
Land
15
15
Construction in progress
24
6
$196
$188
Depreciation expense for property, plant and equipment was $26 million in 2018.
Required: Compute the Accumulated depreciation on PPE disposed of by Custard Cup during
2018.
192) The table below contains data on depreciation for machinery.
Required: Fill in the missing data in the table.
Acquisition Date
1/1/2016
1/1/2016
6/30/2016
Cost
$250,000
$320,000
Accumulated Depreciation,
12/31/2018
$120,000
Depreciation 2017
$40,000
$90,000
Depreciation 2018
$32,000
$70,000
Book value, 12/31/2017
$160,000
$240,000
$180,000
Book value, 12/31/2018
Estimated service life
5
Estimated salvage value
0
0
$20,000
Depreciation method
Straight-line
Acquisition Date
1/1/2016
1/1/2016
6/30/2016
Cost
$250,000
$320,000
$320,000
Accumulated
Depreciation, 12/31/2018
$120,000
Depreciation 2017
$40,000
$90,000
Depreciation 2018
$32,000
$70,000
Book value, 12/31/2017
$160,000
$240,000
$180,000
Book value, 12/31/2018
Estimated service life
5
Estimated salvage value
0
0
$20,000
Depreciation method
Straight-line
Digits
89
193) In 2018, the internal auditors of KJI Manufacturing discovered the following material errors
made in prior years:
1. Equipment was purchased on June 30, 2016, for $100,000. The purchase was incorrectly
recorded as a debit to repair and maintenance expense. The equipment has a useful life of five
years and no residual value.
2. On March 31, 2017, $50,000 was paid to a contractor to landscape the area around a
manufacturing plant including the installation of a sprinkler system. The expenditure was debited
to the Land account. The landscaping is expected to have a 20-year useful life and no residual
value.
KJI uses the straight-line method of depreciation for all depreciable assets.
Required:
1. Prepare the journal entries at December 31, 2018, to correct the errors (ignore income taxes).
2. Prepare the journal entries to record 2018 depreciation for any assets recorded in
requirement.
194) Zvinakis Mining Company paid $200,000 for the rights to mine lead in southeast Missouri.
The cost to drill and erect a mine shaft was $2,400,000, and equipment to process the lead ore
before shipment to the smelter was $1,800,000. The mine is expected to yield 2,000,000 tons of
ore during the five years it is expected to be operating. The equipment has an estimated residual
value of $150,000 when mining is concluded. The mine started operations on April 30, 2018. In
2018, 300,000 tons of ore were extracted, and in 2019, 700,000 tons were mined.
Required:
1. Compute the depletion rate and the units-of-production depreciation rate.
2. Compute depletion and depreciation for 2018 and 2019.
195) On February 20, 2018, Genoa Mining Company incurred costs of $3,600,000 to acquire and
prepare to extract an estimated 4,000,000 tons of mineral deposits. In 2018, 450,000 tons of ore
were mined. At the beginning of 2019, Genoa geologists estimated that 3,900,000 tons of ore
still remained. In 2019, 700,000 tons of ore were mined.
Required:
Compute depletion for 2018 and 2019.
196) On September 30, 2018, Morgan, Inc. acquired all of the outstanding common stock of
Pathways, Inc., for $100 million. In addition to tangible assets, Morgan recorded the following
assets as a result of the acquisition:
Patent $6 million
Developed technology 3 million
In-process research & development 2 million
Goodwill 7 million
Morgan’s policy is to amortize intangible assets using the straight-line method, no residual value,
and a six-year useful life.
Required:
What is the total amount of expenses that would appear in Morgan’s income statement for the
year ended December 31, 2018, related to these items?
197) Meca Concrete purchased a mixer on January 1, 2016, at a cost of $45,000. Straight-line
depreciation for 2016 and 2017 was based on an estimated eight-year life and $3,000 estimated
residual value. In 2018, Meca revised its estimate and now believes the mixer will have a total
service life of only six years, and that the residual value will be only $2,000.
Required:
Compute depreciation for 2018 and 2019.
198) Eckland Manufacturing Co. purchased equipment on January 1, 2016, at a cost of $90,000.
Straight-line depreciation for 2016 and 2017 was based on an estimated eight-year life and
$2,000 estimated residual value. In 2018, Eckland revised its estimate and now believes the
equipment will have a total service life of only six years, while the residual value remains the
same.
Required:
Compute depreciation for 2018 and 2019.
199) Weaver Textiles Inc. has used the straight-line method to depreciate its equipment since it
started business in 2014. At the beginning of 2018, the company decided to change to the
double-declining-balance (DDB) method. Depreciation as reported and as it would have been
reported if the company had always used DDB is listed below:
Year
Straight-Line
DDB
2014
$22,500
$45,000
2015
25,000
40,000
2016
28,000
38,000
2017
28,000
32,000
Required:
What journal entry, if any, should Weaver make to record the effect of the accounting change
(ignore income taxes)? Explain.
200) Gonzaga Company has used the double-declining-balance method for depreciation since it
started business in 2014. At the beginning of 2018, the company decided to change to the
straight-line method. Depreciation as reported and what it would have been reported if the
company had always used straight-line is listed below:
Straight-
Year
Line
DDB
2014
$32,000
$64,000
2015
35,000
50,000
2016
39,000
58,000
2017
39,000
48,000
Required:
What journal entry, if any, should Gonzaga make to record the effect of the accounting change
(ignore income taxes)? Explain.
201) In December of 2018, XL Computer’s internal auditors discovered that office equipment
costing $800,000 was charged to expense in 2016. The asset had an expected life of 10 years
with no residual value. XL would have recorded a half year of depreciation in 2016.
Required:
Prepare the necessary correcting entry that would be made in 2018 (ignore income taxes), and
the entry to record depreciation for 2018.
202) Required:
Determine the amount, if any, of the impairment loss that El Dorado must recognize on these
assets.
203) Required:
Assume that the undiscounted sum of future cash flows is $18.2 million, instead of $16.5
million. Determine the amount, if any, of the impairment loss that El Dorado must recognize on
these assets.
204) Required: Determine the amount, if any, of the goodwill impairment loss that Dooling
must recognize on these assets.