Exercise 8-6 (15 minutes)
Double-declining-balance
Double-declining-balance rate = (100% / 10 years) x 2 = 20% per year
Exercise 8-7 (15 minutes)
Year Annual Depreciation Year-End Book Value
2015…..… $ 32,250 $121,750
2016…..… 32,250 89,500
Exercise 8-8 (20 minutes)
Double-declining-balance depreciation
Depreciation rate: 100% / 4 years = 25% x 2 = 50%
Year
Beginning-Year
Book Value
Depreciation
Rate
Annual
Depreciation
Year-End
Book Value
2015....... $154,000 50% $ 77,000 $77,000
2016....... 77,000 50 38,500 38,500
Exercise 8-9 (30 minutes)
Straight-line depreciation
Income
before
Depreciation
Depreciation
Expense*
Net
Income
Year 1….….. $ 88,500 $ 38,960 $ 49,540
Year 2….….. 88,500 38,960 49,540
Year 3….….. 88,500 38,960 49,540
Exercise 8-10 (30 minutes)
Double-declining-balance depreciation
Income
before
Depreciation
Depreciation
Expense*
Net
Income
Year 1........ $ 88,500 $ 95,360 $ (6,860)
Year 2….….. 88,500 57,216 31,284
Year 3….….. 88,500 34,330 54,170
*Note: (100% / 5 years) x 2 = 40% depreciation rate
Beginning
Book
Value
Annual
Depreciation
(40% of
Book Value)
Accumulated
Depreciation at
the End of the
Year
Ending Book Value
($238,400 Cost Less
Accumulated
Depreciation)
Year 1……….…… $238,400 $ 95,360 $ 95,360 $143,040
Year 2……….…… 143,040 57,216 152,576 85,824
Year 3……….…… 85,824 34,330** 186,906 51,494
Exercise 8-11 (10 minutes)
Straight-line depreciation for 2014
Straight-line depreciation for 2015
Exercise 8-12 (15 minutes)
Double-declining-balance depreciation for 2014 and 2015:
Rate = (100% / 5 years) x 2 = 40%
Depreciation for 2014 ($280,000 x 40% x 9/12)……………. $ 84,000
Book value at January 1, 2015 ($280,000 – $84,000)….... $196,000
Exercise 8-13 (15 minutes)
1. Original cost of machine……………………………………..…..…..…....$ 23,860
Less two years’ accumulated depreciation
2. Book value at end of second year………….………………………..….$ 13,130
Less revised salvage value………………..……………………….……… (2,000)
Exercise 8-14 (15 minutes)
1. Equipment……..…………………………..………………………… 22,000
Cash………………………………………..…………………….. 22,000
To record betterment.
2. Repairs Expense……………..………………………………..…. 6,250
Cash………………………………………..…………………….. 6,250
To record ordinary repairs.
Exercise 8-15 (25 minutes)
1. Annual depreciation = $572,000 / 20 years = $28,600 per year
2. Entry to record the extraordinary repairs
To record extraordinary repairs.
3. Cost of building
Before repairs…………….………………………….……………....$572,000
Add cost of repairs………………………………..…..…..……… 68,350 $640,350
4. Revised book value of building (part 3)…….……….…..….. $211,350
Journal entry
Depreciation Expense……………………………………….…... 21,135
Exercise 8-16 (20 minutes)
1. Disposed at no value
Jan. 3 Loss on Disposal of Milling Machine……………………..68,000
2. Sold for $35,000 cash
Jan. 3 Cash………………………………….………………………..…..…..35,000
Loss on Sale of Milling Machine………………………..….33,000
3. Sold for $68,000 cash
Jan. 3 Cash………………………………….………………………..…..…..68,000
4. Sold for $80,000 cash
Jan. 3 Cash………………………………….………………………..…..…..80,000
Accumulated Depreciation—Milling Machine……..….182,000
Exercise 8-17 (25 minutes)
2019
July 1 Depreciation Expense…………………..……………..….. 7,500
Accumulated Depreciation–Machinery............ 7,500
1. Sold for $45,500 cash
July 1 Cash………………………………………………………….………...45,500
Accumulated Depreciation—Machinery………………...67,500
2. Destroyed by fire with $25,000 cash insurance settlement
July 1 Cash………………………………….………………………..…..…..25,000
Loss from Fire…………………………………………………..….12,500
Accumulated Depreciation—Machinery………………...67,500
Machinery…………………………………..…..…..…..………. 105,000
To record disposal of machinery from fire.
Exercise 8-18 (10 minutes)
Dec. 31 Depletion Expense—Mineral Deposit………..…..…..….405,528
Accumulated Depletion—Mineral Deposit…………. 405,528
Exercise 8-19 (10 minutes)
Jan. 1 Copyright……………….………………………………………..…..418,000
Cash…………………………………..……..…..…..………..….
418,000
00
To record purchase of copyright.
Exercise 8-20 (10 minutes)
1. Goodwill = $2,500,000 – $1,800,000 = $700,000
Exercise 8-21 (15 minutes)
1. $7,358 million cash for property and equipment
Exercise 8-22 (15 minutes)
Total asset turnover for 2014 = = 3.36
$5,856,480
($1,800,000 + $1,686,000)/2
Exercise 8-23A (15 minutes)
1. Book value of the old tractor ($96,000 – $52,500)…..…..…....…..….$ 43,500
3. Debit to new Tractor account
Cash paid + Trade-in allowance ($83,000 + $29,000)……………$112,000
Alternatively, answers can be taken from the following journal entry:
Tractor (new)*…………………………………………………………….…..…. 112,000
Exercise 8-24A (25 minutes)
1. Sold for $18,250 cash
Jan. 2 Cash………………………………….………………………..…..…..18,250
Loss on Sale of Machinery……………...…..………..……..1,125
2. $25,000 trade-in allowance exceeds book value; but no gain is
recognized on an asset exchange that lacks commercial substance
($5,625 gain is ‘buried’ in the cost of the new machinery)
Jan. 2 Machinery (new)*……….………………………………..……….54,575
Accumulated Depreciation—Machinery (old)………….24,625
Machinery (old)………..…………..……………..…..…..…. 44,000
3. $15,000 trade-in allowance is less than book value (yielding a loss)
Jan. 2 Machinery (new)………………………………..………..…..…..60,200
Loss on Exchange of Machinery……………………………4,375
Exercise 8-25 (20 minutes)
(Amounts for this exercise are in euros millions)
1. Depreciation expense……………………..……………..…..….
…………………………………………….……………….…..….... 6,689
2. Property, plant and equipment……….……………………….
…………………………………………….……………….…..….... 11,061
Cash………………………………………..……..…..…..…..…. 11,061
To record betterments (improvements) on property,
plant and equipment.
3. Cash………….…………………………..…………………….…..…... 700
Loss on disposal of property, plant and equipment... 500
4. Volkswagen would decrease its property, plant and equipment account