Accounting Chapter 8 Explain depreciation for partial years and changes in estimates

229) A company paid $320,000 for equipment that was expected to last five years and to have a

salvage value of $40,000. During the third year of the equipment’s life, $39,000 cash was paid

for replacement parts that were expected to increase productivity by 10% each year. Prepare the

journal entry to record the $39,000 cost incurred in the third year.

230) On January 1, a company purchased machinery for $75,000 that had a 6-year useful life and

a salvage value of $6,000. After three years of straight-line depreciation, the company paid

$8,500 cash at the beginning of the year to improve the efficiency of the machinery. The

productivity of the machinery was improved without increasing its remaining useful life or

changing its salvage value. Straight-line depreciation is used throughout the machinery’s life.

1. Prepare the journal entry to record the $8,500 expenditure.

2. Prepare the journal entry to record depreciation expense for the fourth year.

231) A company sold a machine that originally cost $90,000 for $28,000 cash. The accumulated

depreciation on this machine was $47,000 at the time of the sale. What was the company’s gain

or loss on this sale?

232) Wallace Company had a building that was destroyed by fire. The building originally cost

$650,000, and its accumulated depreciation as of the date of the fire was $300,000. The

company received $320,000 cash from an insurance policy that covered the building and will use

that money to help rebuild. Prepare the single journal entry to record the disposal of the

building and the receipt of cash from the insurance company.

233) On April 1, 2015, due to obsolescence resulting from a new technology, a company

discarded a computer that cost $5,000, had a useful life of 4 years, and a salvage value of $400.

Based on straight-line depreciation, the accumulated depreciation as of December 31, 2014 was

$3,450.

a. Prepare the journal entry to record depreciation up to the date of disposal of the computer.

b. Prepare the journal entry to record the disposal of the computer.

234) On April 1 of the current year, a company disposed of a truck that had cost $20,000. The

truck had a salvage value of $2,000, and a useful life of 5 years. The accounting records

showed accumulated depreciation for this truck of $8,100 as of April 1 of the current year. The

asset was discarded after an accident, and $10,500 cash was received from an insurance claim.

Prepare the journal entry to record the disposal of the truck.

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235) Anderson Company sold a piece of equipment for $28,000 cash on December 31 after

recording the annual depreciation on the asset. The equipment had an original cost of $97,500

and accumulated depreciation of $63,000. Prepare the general journal entry to record the sale of

this asset.

236) A company purchased mining property for $1,560,000. The property was estimated to

contain 13,000,000 tons of ore. In the current year, the company removed and sold 263,000 tons

of ore. Calculate the depletion expense for the current year.

237) A company purchased mining property for $4,875,000 containing an estimated 15,000,000

tons of ore. In Year 1, it mined 689,000 tons of ore and in Year 2, it mined 935,000 tons.

Calculate the depletion expense for Year 1 and Year 2 and determine the book value of the

property at the end of Year 2.

$4,875,000/15,000,000 tons = $0.325 per ton

Year 1: 689,000 tons * $0.325 per ton = $223,925

Year 2: 935,000 tons * $0.325 per ton = $303,875

238) A company purchased mining property for $1,837,500 containing an estimated 7,350,000

tons of ore. When mining is complete, the property will have no salvage value. In Year 1, it

mined and sold 857,000 tons of ore. Calculate the depletion expense for Year 1 and prepare the

journal entry to record the depletion.

239) Record the following events and transactions for Leonard Company for the current year.

1. On January 2, Leonard purchased a patent for $35,000 with a remaining useful life of 10

years. Prepare the journal entry to amortize the patent at the end of the first year.

2. On January 3, Leonard signed a contract to lease space in a building for 15 years. The current

value of the lease payments is $840,000. Prepare the journal entry for straight-line amortization

at the end of the first year.

3. On January 4, Leonard purchased a music distributor’s collection of lyrics and songs for

$1,425,000. The copyrights have a remaining life of another 30 years. Prepare the journal entry

to amortize the copyright at the end of the first year.

240) A company traded an old forklift for a new forklift, receiving a $13,500 trade-in allowance

and paying the remaining $47,200 in cash. The old forklift had cost $43,000, a 5-year useful life

and a $5,000 salvage value. Straight-line accumulated depreciation of $27,200 had been recorded

as of the exchange date.

1. What was the book value of the old forklift on the date of the exchange?

2. What amount of gain or loss (indicate which) should be recognized in recording the exchange,

assuming the transaction has commercial substance?

3. What amount should be recorded as the cost of the new forklift?

241) A machine had an original cost of $60,000. After $45,000 of depreciation was recorded, the

machine was traded in on a new machine priced at $75,000. A $10,500 trade-in allowance was

received on the old machine and the balance of $64,500 was paid in cash. This transaction has

commercial substance. Prepare the general journal entry to record this trade-in.

242) A company exchanged its used machine for a new machine in a transaction that had

commercial substance. The old machine cost $68,000, and the new one had a cash price of

$95,000. The company had taken $59,000 depreciation on the old machine and was allowed a

$2,500 trade-in allowance and the balance of $92,500 was paid in cash. What gain or loss should

be recorded on the exchange?

243) A company exchanged an old automobile for a newer model. The old automobile account

had a cost of $36,000 and accumulated depreciation of $25,000 as of the exchange date. The new

automobile had a cash price of $34,000, but the company was given a $15,000 trade-in

allowance and the balance of $19,000 was paid in cash. Prepare the journal entry to record the

exchange, if the transaction has commercial substance.

244) During the current year, a company exchanged an old truck costing $58,000 with

accumulated depreciation of $52,000 for a new truck. The new truck had a cash price of $80,000

and the company received a $16,000 trade-in allowance on the old truck with the balance of

$64,000 paid in cash. Prepare the journal entry to record the exchange, assuming the transaction

has commercial substance.

245) During the current year, Beldon Co. acquired a new computer with a cash price of $12,800

by exchanging an old one on which the company received a $1,500 trade-in allowance (with the

balance of $11,300 paid in cash). The old computer cost $9,000 and its accumulated depreciation

was $5,500 as of the exchange date. Assuming the exchange transaction had commercial

substance, prepare the journal entry to record the exchange.