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

978-0078025754 Chapter 8 Solution Manual Part 3

March 26, 2020
Problem 8-4B (50 minutes)
2014
Jan. 1
Equipment ....................................................................
27,670
Cash ........................................................................
27,670
To record costs of van ($25,860 + $1,810).
Jan. 3
Equipment ....................................................................
1,850
*2014 depreciation after January 3rd betterment
Total original cost ................................................................
Plus cost of betterment ...........................................................
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
Problem 8-5B (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
2016
Dec. 31
Depreciation ExpenseMachinery ............................
27,500
Accumulated DepreciationMachinery ..............
27,500
To record depreciation.
**Accumulated depreciation on machine at 12/31/2016:
2014 .................................................................................
$ 17,425
2015 .................................................................................
27,500
Problem 8-6B (20 minutes)
1.
Jan. 1
Machinery ..................................................................
150,000
Cash .....................................................................
150,000
To record machinery costs.
2. a. First year
Dec. 31
Depreciation ExpenseMachinery ............................
20,000
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
Problem 8-7B (20 minutes)
a.
Feb. 19
Mineral Deposit ............................................................
5,400,000
Cash ................................................................
5,400,000
To record purchase of mineral deposit.
To record costs of machinery.
Analysis Component
SimilaritiesAmortization, depletion, and depreciation are similar in that
Problem 8-8B (20 minutes)
1.
2015
(a)
Jan. 1
Leasehold ................................................................
40,000
Cash ........................................................................
40,000
To record payment for sublease.
(b)
To record prepaid annual lease rental.
(c)
To record costs of leasehold improvements.
2.
2015
(a)
(b)
(c)
Serial Problem SP 8
Serial Problem SP 8, Business Solutions (45 minutes)
1. For the three months ended March 31, 2016, depreciation expense was
$400 for office equipment and $1,250 for the computer equipment.
2.
December 31,
2015
December 31,
2016
Office Equipment ........................................
$ 8,000
$ 8,000
3.
Total asset turnover = Net sales / Average total assets
The 3-month total asset turnover at March 31, 2016:
Reporting in Action BTN 8-1
1. The percent of original cost remaining to be depreciated is computed
by taking the ratio of the book value of property and equipment to the
original cost ($ millions):
2. In Apple’s “Summary of Significant Accounting Policies" (Note 1:
Property, Plant and Equipment) it discloses estimated useful lives by
major asset category as follows:
Asset Life (in years)
3. The change in total property and equipment before accumulated
depreciation for the year ended September 28, 2013, is an increase of
4. Total asset turnover for year ended ($ millions):
5. Solution depends on the financial statement data obtained.
Comparative Analysis BTN 8-2
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Apple ($ millions)
2. Each dollar of Apple’s assets produces $0.89 and $1.07 in net sales for
the current and prior year, respectively. Each dollar of Google’s assets
Ethics Challenge BTN 8-3
1. When managers acquire new assets a number of decisions relative to
2. When assets are placed in use on a day other than the first day of the
month an assumption is often made that the assets are placed in use on
the first day of the month nearest to the date of the purchase. For
example, for assets purchased on the 1st through 15th days of the month,
3. By always assuming the first day of the following month as the date of
purchase, less depreciation is (initially) accrued for the assets
Communicating in Practice BTN 8-4
The solution to this activity will vary based on the industry and the
companies chosen for analysis. Many instructors find it useful to report
the results from the teams to the class for purposes of classroom
discussion and analysis.
Taking It to the Net BTN 8-5
1. Yahoo! has Goodwill in the amount of ($ thousands) $4,679,648 at
2.
Goodwill (in $ thousands)
Total
Amount
$ Change
from Prior
Year
%
Change
3. Yahoo!’s intangible assets are categorized into the three categories
below at December 31, 2013. These intangibles represent 2.5%
4. Note 6 indicates that Trade names, trademarks, and domain names
have original estimated useful lives of “one year to an indefinite life.” If
Teamwork in Action BTN 8-6
1. Annual depreciation for each year of the asset’s useful life:
Year
Straight-line
Double-Declining-Balance
Units-of-Production
2013
($44,000-$2,000)/4
= $10,500
(100%/4) x 2 = 50% is
declining-balance rate.
($44,000-$2,000)/60,000 miles
= $.70 per mile.
2. Depreciation is recorded in an adjusting entry at the end of each
period. The entry is:
3. Each expert’s presentation of the comparison of methods will be
slightly different. The experts should make the following points: The
Teamwork in Action BTN 8-6 - continued
4. Book value at the end of each year
Year
Straight-line
Double-Declining-
Balance
Units of Production
each should show:
Plant Assets:
Entrepreneurial Decision BTN 8-7
Part 1
(a) Under current conditions, the total asset turnover is 3.2. This is
(b) Under this proposal, its asset turnover would increase to 4. This is
computed by taking its net sales of $12,000,000 ($8,000,000 +
Part 2
The proposal would yield an improved total asset turnover of 4 vis-à-vis the
current total asset turnover of 3.2. However, we need to recognize that this
proposal depends on our confidence in both maintaining current sales,
*We must remember that total asset turnover is only one dimension of a complete analysis of this
proposal. For example, we would want to explore the impact of this proposal on net income and
other activities.
Hitting the Road BTN 8-8
No formal solution exists for this activity. It is usually interesting for the
class to exchange their discoveries via class discussion. This is
particularly the case with respect to patents, copyrights, and trademarks.
Global Decision BTN 8-9
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Samsung (KRW in millions):
2. Samsung was more efficient in using its assets to generate net sales
than Google and Apple. Specifically, in the current year, each KRW

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