116.
On January 1, 2015, Boston Company purchased a heavy duty machine having an invoice price
of $13,000. Boston paid transportation and installation costs totaling $3,000. The machine is
estimated to have a 4-year useful life and a $1,400 residual value.
Required:
Calculate depreciation expense and book value for 2015-2018, assuming double declining-
balance method of depreciation.
117.
Covey Company purchased a machine on January 1, 2016, by paying cash of $250,000. The
machine has an estimated useful life of five years, is expected to produce 500,000 units, and
has an estimated residual value of $25,000.
Required:
A. Calculate depreciation expense to the nearest whole dollar for each year of the machine’s
useful life under.
1. Straight-line depreciation method.
2. Double declining-balance method.
B. What is the book value of the machine after three years using the double declining–
balance method?
C. What is the book value of the machinery after three years using the straight-line method?
D. If the machine was used to produce and sell 120,000 units in 2016, what would be the
depreciation expense using the units–of-production method?
118.
Hubbard Company purchased a truck on January 1, 2015, at a cost of $34,000. The company
estimated that the truck would have a useful life of 4 years and a residual value of $4,000.
Required:
2018.
B. Which of the two methods would result in lower net income in 2015 and 2018?
119.
Allison Company purchased a machine for $1,200,000 at the beginning of 2015. Allison was
using the double-declining-balance (200%) method to depreciate the asset and its useful life
was estimated to be 5 years with a residual value of $200,000. At the end of 2016, Allison Co.
estimates the future cash flows from the asset to be equal to $500,000 and the fair value to
be $450,000.
Required:
What is the amount of the impairment loss?
120.
A company purchased equipment for $800,000 and has depreciated it using the straight-line
method for the past 5 years when its original life was estimated to be 10 years with a
$200,000 residual value. The equipment’s utility to the company has declined because
management expects the equipment to generate net cash flows over the remaining years of
$300,000. The asset’s fair value at the end of the fifth year is $200,000.
Required:
If the asset has been impaired, record the journal entry to record the impairment.
121.
Beckworth Company purchased a truck on January 1, 2015, at a cash cost of $10,600. The
estimated residual value was $400 and the estimated useful life 4 years. The company uses
straight-line depreciation computed monthly. On July 1, 2018, the company sold the truck for
$1,900 cash.
Required:
A. What was the depreciation expense amount per month?
B. What was the amount of accumulated depreciation at July 1, 2018?
C. Prepare the required journal entries on the date of disposal, July 1, 2018. (Assume no 2018
depreciation had yet been recorded)
122.
Lue Company sold used equipment for $450,000 cash. The equipment was purchased 5 years
ago for a cost of $800,000. It has been depreciated using the straight-line method over an
estimated useful life of 10 years with an estimated residual value of $50,000.
Required:
Prepare the journal entry at the end of year five for the asset’s disposal assuming the fifth
year’s depreciation had been recorded.
123.
Bennett Corporation sold a piece of equipment on June 30, 2018, for $50,000 cash. The
equipment had been purchased on January 1, 2014, for $150,000. The equipment had an
estimated useful life of 6 years and a $30,000 residual value. Bennett Corp. has been using
the straight-line method of depreciation and has a year-end of December 31st.
Required:
Prepare any necessary journal entries on June 30, 2018, assuming that 2018 depreciation
expense has not been recorded.
124.
Spa Sources Corporation purchased a machine that had an original cost of $60,000 and an
estimated residual value of $10,000. The useful life was expected to be 8 years and straight-
line depreciation is used. At the end of 2016, the book value of the machine was $35,000. Spa
Sources sold the machine for $32,000 cash on October 1, 2017.
Required:
A. Prepare the journal entry to record depreciation for 2017 up to the date of sale.
B. Prepare the journal entry to record the sale of the machine.
125.
Prepare the required adjusting journal entry at December 31, 2016, the end of the annual
accounting period for the three items below. Assume that no adjusting entries have been
made during the year. If no entry is required, explain why.
A. Polk Company acquired a patent that cost $6,000 on January 1, 2016. The patent was
registered on January 1, 2012. The useful life of a patent is 20 years from registration.
B. Polk Company acquired a gravel pit on January 1, 2016, that cost $24,000. The company
estimates that 30,000 tons of gravel can be extracted economically. When all the gravel has
been extracted, no residual value is anticipated. During 2016, 4,000 tons were extracted and
sold.
C. On January 1, 2016, Polk Company acquired a used dump truck that cost $6,000 to use
hauling gravel. The company estimated a residual value of 10% of cost and a useful life 4
years. The company uses straight-line depreciation.
