Chapter 10 – Plant Assets, Natural Resources, and Intangibles
Problem 10-2B (25 minutes)
Year Straight-LineaUnits-of-Productionb
Double-Declining-
Balancec
1…..…………... $ 58,800 $ 71,120 $129,600
2…..…………... 58,800 64,080 77,760
3…..…………... 58,800 63,400 46,656
aStraight- line:
Cost per year = $294,000/5 years = $58,800 per year
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
2………...... 320,400 0.20 64,080
* 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
2…......... 194,400 77,760 207,360 116,640
* rounded
** Take only enough depreciation in Year 5 to reduce book value to the asset’s
$30,000 salvage value.
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Chapter 10 – Plant Assets, Natural Resources, and Intangibles
Problem 10-3B (45 minutes)
Part 1
Land
Building
B
Building
C
Land
Improve-
ments B
Land
Improve-
ments C
Purchase price*..........$ 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
Part 3
2015
Dec. 31 Depreciation Expense—Building B………………..………………..
……………………………………………………………………………………….
……………………………………………………………………………………….
28,500
Accumulated Depreciation—Building B….………….......... 28,500
To record depreciation [($527,000 – $99,500)/15].
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31 Depreciation Expense–Land Improvements C………
……………………………………………………………………..…….
10,350
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Chapter 10 – Plant Assets, Natural Resources, and Intangibles
Problem 10-4B (50 minutes)
2014
Jan. 1 Equipment…………………………………………………..……….27,670
Cash…………………………………………………………….… 27,670
To record costs of van ($25,860 + $1,810).
To record depreciation.
*2014 depreciation after January 3rd betterment
Total original cost……………………………………………………….…..$27,670
Plus cost of betterment…………………………………………………... 1,850
2015
Jan. 1 Equipment…………………………………………………..………. 2,064
Cash…………………………………………………………….… 2,064
To record extraordinary repair on van.
*2015 depreciation after 1/1 extraordinary repair
Total cost ($29,520 + $2,064)…………………………………………………..…..………....$31,584
Less accumulated depreciation……………………………………………………………… 5,124
Book value…………………………………………………………………………………………....26,460
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Chapter 10 – Plant Assets, Natural Resources, and Intangibles
Problem 10-5B (40 minutes)
2014
Jan. 1 Machinery…………………………………………………………....114,270
Cash…………………………………………………………….… 114,270
To record costs of machinery ($107,800 +$6,470).
*2015 depreciation:
Total cost……………………………………………………………...………...$114,270
Less accumulated depreciation (from 2014)….……………….….. 17,425
Book value……………………………………………………………………….96,845
Less revised salvage value…………………………………………….... 14,345
2016
Dec. 31 Depreciation Expense—Machinery..……………………..27,500
Accumulated Depreciation—Machinery…………… 27,500
To record depreciation.
**Accumulated depreciation on machine at 12/31/2016:
2014………………………………………………………………………. $ 17,425
2015………………………………………………………………………. 27,500
2016………………………………………………………………………. 27,500
Total…………………………………………………..………..……….. $ 72,425
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Chapter 10 – Plant Assets, Natural Resources, and Intangibles
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Chapter 10 – Plant Assets, Natural Resources, and Intangibles
Problem 10-6B (20 minutes)
1.
Jan. 1 Machinery………………………………..………………………. 150,000
Cash………………………………..…………………………. 150,000
To record machinery costs.
2. a. First year
Dec. 31 Depreciation Expense—Machinery..……………………..20,000
Accumulated Depreciation—Machinery…………… 20,000
To record depreciation [($158,110-$18,110)/7 =
$20,000].
b. Sixth year
3. Accumulated depreciation at the date of disposal
First six years’ depreciation (6 x $20,000)………………….$120,000
Book value at the date of disposal
Original total cost……….………..……………..…..….…..…..….$158,110
Accumulated depreciation…………….……….……….…..…... (120,000)
Total……….……….………..………..……….………..………………...$ 38,110
c. Destroyed in fire and collected $25,000 cash from insurance
Dec. 31 Cash………………………………………………………………….…25,000
Loss from Fire………………………….………………………….13,110
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Chapter 10 – Plant Assets, Natural Resources, and Intangibles
Problem 10-7B (20 minutes)
a.
Feb. 19 Mineral Deposit…………………………………………………....5,400,000
Cash…………………………………………………………….… 5,400,000
To record purchase of mineral deposit.
b.
c.
Dec. 31 Depletion Expense—Mineral Deposit………………..…..342,900
Accum. Depletion—Mineral Deposit……………..…. 342,900
To record depletion [$5,400,000/
4,000,000 tons = $1.35 per ton.
254,000 tons x $1.35 = $342,900].
Analysis Component
Similarities—Amortization, depletion, and depreciation are similar in that
they are all methods of allocating costs of long-term assets to the periods
that benefit from their use.
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Chapter 10 – Plant Assets, Natural Resources, and Intangibles
Problem 10-8B (20 minutes)
1.
2015 (a)
Jan. 1 Leasehold………………………………………………………….…40,000
Cash…………………………………………………………….… 40,000
To record payment for sublease.
(b)
2.
2015 (a)
Dec. 31 Rent Expense……………………………………………………….8,000
Accumulated Amortization—Leasehold…………… 8,000
To record leasehold amortization ($40,000/5).
(b)
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