Type
Solution Manual
Book Title
Financial Accounting Fundamentals 5th Edition
ISBN 13
978-0078025754

978-0078025754 Chapter 8 Solution Manual Part 2

March 26, 2020
Exercise 8-19 (10 minutes)
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
Exercise 8-24A (25 minutes)
Note: Book value of Machine equals $44,000 - $24,625 = $19,375
1. Sold for $18,250 cash
Jan. 2
Cash ..............................................................................
18,250
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)
3. $15,000 trade-in allowance is less than book value (yielding a loss)
Jan. 2
Machinery (new) ...........................................................
60,200
Exercise 8-25 (20 minutes)
(Amounts for this exercise are in euros millions)
1.
Depreciation expense ....................................................
6,689
Accumulated depreciationProperty, plant
2.
Property, plant and equipment .....................................
11,061
3.
Cash ................................................................................
700
Loss on disposal of property, plant and equipment ..
500
PROBLEM SET A
Problem 8-1A (50 minutes)
Part 1
Estimated
Market Value
Percent
of Total
Apportioned
Cost
Building ..........................
$508,800
53%
$477,000
2015
Jan. 1
Building ................................................................
477,000
To record asset purchases.
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 lower the total amount of taxes paid over
the asset's life. Instead, it defers or postpones taxes to the later years of an
Problem 8-2A (25 minutes)
Year
Straight-Linea
Units-of-Productionb
Double-Declining-
Balancec
1 ......................
$ 59,375
$110,000
$128,750
aStraight- line:
Cost per year = $237,500/4 years = $59,375 per year
bUnits-of-production:
Cost per unit = $237,500/475,000 units = $0.50 per unit
Year
Units
Unit Cost
Depreciation
* Take only enough depreciation in Year 4 to reduce book
value to the asset’s $20,000 salvage value.
Year
Beginning
Book
Value
Annual
Depreciation
(50% of
Book Value)
Accumulated
Depreciation
at the End of
the Year
Ending Book Value
($257,500 Cost Less
Accumulated
Depreciation)
1 .........
$257,500
$128,750
$128,750
$128,750
Problem 8-3A (45 minutes)
Part 1
Land
Building
2
Building
3
Land
Improve-
ments 1
Land
Improvements
2
Purchase price* ...................
$1,612,000
$598,000
$390,000
*Allocation of purchase price
Appraised
Value
Percent
of Total
Apportioned
Cost**
Land .........................................
**Multiply the percentages in column 3 by the $2,600,000 purchase price.
Part 2
2015
Jan. 1
Land ......................................................................
2,115,800
Part 3
2015
Dec. 31
Depreciation ExpenseBuilding 2 ..............................
26,900
Accumulated DepreciationBuilding 2 ................
26,900
To record depreciation [($598,000 - $60,000)/20].
Problem 8-4A (50 minutes)
2014
Jan. 1
Equipment ................................................................
300,600
Cash .....................................................................
300,600
To record loader costs ($287,600 +$11,500 +$1,500).
To record depreciation.
2015
Jan. 1
Equipment ................................................................
5,400
Cash ........................................................................
5,400
To record extraordinary repair on loader.
To record depreciation.
Problem 8-5A (40 minutes)
2014
Jan. 1
Trucks ...........................................................................
22,000
Cash ........................................................................
22,000
To record cost of truck ($20,515 + $1,485).
To record depreciation.
*2015 depreciation
Total cost ................................................................................................
$ 22,000
Less accumulated depreciation (from 2014) ................................
4,000
2016
To record sale of truck.
**Accumulated depreciation on truck at 12/31/2016
2014 .................................................................................
$ 4,000
2015 .................................................................................
5,200
Problem 8-6A (20 minutes)
1.
Jan. 2
Machinery ................................................................
178,000
Cash ....................................................................
178,000
To record machinery purchase.
2. a. First year
Dec. 31
Depreciation ExpenseMachinery ............................
28,000
3. Accumulated depreciation at the date of disposal
Five years' depreciation (5 x $28,000) .........................
$140,000
Book value at the date of disposal
Original total cost .........................................................
$182,000
Problem 8-7A (20 minutes)
a.
July 23
Mineral Deposit ............................................................
4,715,000
Cash ................................................................
4,715,000
To record purchase of mineral deposit.
b.
July 25
Machinery ................................................................
410,000
Cash ................................................................
410,000
To record costs of machinery.
c.
Analysis Component
SimilaritiesAmortization, depletion, and depreciation are similar in that
Problem 8-8A (20 minutes)
1.
2015
(a)
June 25
Leasehold ................................................................
200,000
Cash ........................................................................
200,000
2.
2015
(a)
Dec. 31
Rent Expense ...............................................................
10,000
Accumulated AmortizationLeasehold ..............
10,000
To record leasehold amortization ($200,000/10 x 6/12).
PROBLEM SET B
Problem 8-1B (50 minutes)
Part 1
Estimated
Market Value
Percent
of Total
Apportioned
Cost
Building ..........................
$ 890,000
50%
$ 900,000
2015
Jan. 1
Buildings ................................................................
900,000
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
Problem 8-2B (25 minutes)
Year
Straight-Linea
Units-of-Productionb
Double-Declining-
Balancec
1 ...................
$ 58,800
$ 71,120
$129,600
2 ...................
58,800
64,080
77,760
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
* 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 8-3B (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
To record cost of plant assets.
Part 3
2015
Dec. 31
Depreciation ExpenseBuilding B ................................
28,500
Accumulated DepreciationBuilding B ..........................
28,500
To record depreciation [($527,000 - $99,500)/15].

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