Student Name:
Class:
Estimated
Market Percent Apportioned
Value of Total Cost
Building $508,800 53% $477,000 «- Correct!
Land 297,600 31% 279,000 «- Correct!
Land Improvements 28,800 3% 27,000 «- Correct!
Vehicles 124,800 13% 117,000 «- Correct!
Totals $960,000 100% $900,000 «- Correct!
Trans.
Date
Account Titles
no. Debit Credit
Jan. 1 477,000
279,000
27,000
117,000
900,000
Correct!
Part 2:
Straight-line depreciation on building = $30,000 «- Correct!
Part 3:
Double-declining-balance
depreciation on land improvements = $10,800 «- Correct!
Part 4: Defend or refute this statement: Accelerated depreciation
results in payment of less taxes of the asset’s life.
To record asset purchases.
Schedule
TIMBERLY CONSTRUCTION
General Journal
Land Improvements
Vehicles
Cash
TIMBERLY CONSTRUCTION
Building
Land
Problem 08-01A
McGraw-Hill/Irwin
Instructor
Accelerated depreciation does not lower the total amount of taxes paid over the asset’s life.
Instead, it defers or postpones taxes to the later years of an asset’s useful life. This is because
accelerated methods charge a higher portion of asset costs against revenue in earlier years
and a lower portion in later years. The result is to reduce taxable income more in earlier years
but less in later years. [Note: From a present value perspective, there is a tax savings from use
of accelerated depreciation. The company gets to use the tax deferred amounts for investment
purposes until they are due.]
900,000$
508,800$
297,600$
28,800$
124,800$
15
27,000$
5
30,000$
10,800$
Check figures:
(2)
(3)
Land improvements
Vehicles (4)
Building:
Useful life in years
Salvage value
Land improvements useful life in years
TIMBERLY CONSTRUCTION
Cash price for all assets purchased
Estimated market values:
Building
Land
Student Name:
Class:
Land Land
Building Building Improvements Improvements
Land Two Three One Two
1,612,000$ 598,000$ 390,000$
328,400
175,400
2,202,000$
164,000$
2,115,800$ 598,000$ 2,202,000$ 390,000$ 164,000$
Correct! Correct! Correct! Correct! Correct!
* Allocation of Purchase Price: Appraised Percentage Apportioned
Value of Total Cost
1,736,000$ 62% 1,612,000$ «- Correct!
644,000 23% 598,000 «- Correct!
420,000 15% 390,000 «- Correct!
2,800,000$ 100% 2,600,000$ «- Correct!
Date Account Titles Debit Credit
Jan. 1 2,115,800
598,000
2,202,000
390,000
164,000
5,469,800 «- Correct!
Dec. 31 26,900
26,900 «- Correct!
31 72,400
72,400 «- Correct!
31 32,500
32,500 «- Correct!
31 8,200
8,200 «- Correct!
Depreciation Expense, Land Improvements 1
Accumulated Depreciation, Land Imp. 1
Depreciation Expense, Land Improvements 2
Accumulated Depreciation, Land Imp. 2
Depreciation Expense, Building 2
Accumulated Depreciation, Bldg. 2
Depreciation Expense, Building 3
Accumulated Depreciation, Bldg. 3
Building 2
Land
Building 3
Land Improvements 1
Land Improvements 2
Cash
New improvements
Totals
Totals
Land
Building 2
Land Improvements 1
Problem 08-02A
McGraw-Hill/Irwin
Purchase price *
Demolition
Land grading
New building
To record depreciation.
To record depreciation.
To record depreciation.
To record depreciation.
Instructor
To record cost of plant assets.
Schedule
MITZU CO.
General Journal
MITZU CO.
2,600,000$
644,000$
20
60,000$
420,000$
12
–$
1,736,000$
328,400$
175,400$
2,202,000$
25
392,000$
164,000$
20
–$
2,115,800$
598,000$
32,500$
8,200$
Depr. – Land improvement 2
Cost of Land Improvements Two
Land Improvements Two:
Useful life in years
Salvage value
Useful life in years
Salvage value
(1) Land costs
Building 2 costs
(3) Depr. – Land improvement 1
Land Improvements One:
Appraised value
Useful life in years
Salvage value
Appraised value of land only
Check figures:
Cost to demolish Building One
Cost of additional land grading
Cost to construct Building Three
Building Three:
MITZU CO.
Purchase price for land and 2 buildings
Building Two:
Appraised value
Useful life in years
Salvage value