PROBLEM SET B
Problem 10-1B (50 minutes)
Part 1
Estimated
Market Value
Percent
of Total
Apportioned
Cost
Building…………………….. $ 890,000 50% $ 900,000
2015
Jan. 1 Buildings……………………………………………………………..900,000
Land…………………………………………………………………….432,000
Part 2
Year 2015 straight-line depreciation on building
Part 3
Year 2015 double-declining-balance depreciation on land improvements
Part 4
Accelerated depreciation does not increase the total amount of taxes paid
over the asset’s life. Instead, it defers or postpones taxes to the later years of
savings from use of accelerated depreciation. The company gets to use the
deferred tax amounts for investment purposes until they are due.]
Problem 10-2B (25 minutes)
Cost of machine………………………………………………….$324,000
Year Straight-LineaUnits-of-Productionb
Double-Declining-
Balancec
1………………. $ 58,800 $ 71,120 $129,600
2………………. 58,800 64,080 77,760
aStraight- line:
bUnits-of-production:
Cost per unit = $294,000/1,470,000 units = $0.20 per unit
Year Units Unit Cost Depreciation
1…………… 355,600 $0.20 $ 71,120
* Take only enough depreciation in Year 5 to reduce book
value to the asset’s $30,000 salvage value.
cDouble-declining-balance (amounts rounded to the nearest dollar):
(100%/5) x 2 = 40% depreciation rate
Year
Beginning
Book Value
Annual
Depreciation
(40% of
Book Value)
Accumulated
Depreciation
at the End of
the Year
Ending Book Value
($324,000 Cost less
Accumulated
Depreciation)
1………… $324,000 $129,600 $129,600 $194,400
* rounded
** Take only enough depreciation in Year 5 to reduce book value to the asset’s
$30,000 salvage value.
Problem 10-3B (45 minutes)
Part 1
Land
Building
B
Building
C
Land
Improve-m
ents B
Land
Improve-
ments C
Purchase price*………..$ 868,000 $527,000 $155,000
Demolition…….……..….. 122,000
Allocation of
purchase price
Appraised
Value
Percent
of Total
Apportioned
Cost
Land…..……..……..……..……..……. $ 795,200 56% $ 868,000
Part 2
2015
Jan. 1 Land………………………………………………………………. 1,164,500
Building B………………………………………………………. 527,000
To record cost of plant assets.
Part 3
2015
31 Depreciation Expense–Land Improvements B……..
…………………………………………………………………………
…………………………………………………………………………
31,000
31 Depreciation Expense–Land Improvements C……..
…………………………………………………………………………
…………………………………………………………………………
10,350
Problem 10-4B (50 minutes)
2014
Jan. 1 Equipment………………………………………………………….27,670
Jan. 3 Equipment…………………………………………………………. 1,850
To record betterment of van.
Dec. 31 Depreciation Expense—Equipment……………………… 5,124*
To record depreciation.
*2014 depreciation after January 3rd betterment
Total original cost…..……..……..……..……..……..……………………..$27,670
2015
Jan. 1 Equipment…………………………………………………………. 2,064
To record extraordinary repair on van.
May 10 Repairs Expense—Equipment…………………………….. 800
To record ordinary repair on van.
Dec. 31 Depreciation Expense—Equipment……………………… 3,760
To record depreciation.
*2015 depreciation after 1/1 extraordinary repair
Total cost ($29,520 + $2,064)…….……..……..……..……..……..……..……..……..………$31,584
Less accumulated depreciation……………..……..……..……..……..……………………. 5,124
Problem 10-5B (40 minutes)
2014
Jan. 1 Machinery…………………………………………………………..114,270
Dec. 31 Depreciation Expense—Machinery……………………….17,425
2015
Dec. 31 Depreciation Expense—Machinery……………………….27,500*
To record depreciation.
*2015 depreciation:
Total cost…………..……..……..……..……..……..……..……..……………..$114,270
Less accumulated depreciation (from 2014)………………………. 17,425
Book value…..……..……..……..……..……..……..………………………….96,845
2016
Dec. 31 Depreciation Expense—Machinery……………………….27,500
Accumulated Depreciation—Machinery………….. 27,500
To record depreciation.
To record sale of machine.
**Accumulated depreciation on machine at 12/31/2016:
2014…..……..……..……..……..……..……..…………………………. $ 17,425
Problem 10-6B (20 minutes)
1.
Jan. 1 Machinery……………………………………………………….. 150,000
Cash………………………………………………………….. 150,000
To record machinery costs.
To record machinery costs.
2. a. First year
Dec. 31 Depreciation Expense—Machinery……………………….20,000
b. Sixth year
Dec. 31 Depreciation Expense—Machinery……………………….20,000
3. Accumulated depreciation at the date of disposal
Book value at the date of disposal
a. Sold for $28,000 cash
Dec. 31 Cash…………………………………………………………………..28,000
b. Sold for $52,000 cash
Dec. 31 Cash…………………………………………………………………..52,000
Problem 10-7B (20 minutes)
a.
To record purchase of mineral deposit.
b.
To record costs of machinery.
c.
Dec. 31 Depletion Expense—Mineral Deposit……………………342,900
Accum. Depletion—Mineral Deposit……………….. 342,900
d.
Analysis Component
Similarities—Amortization, depletion, and depreciation are similar in that
Differences—They are different in that they apply to different types of
long-term assets: amortization applies to intangible assets (with definite