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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
