Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Problem 8-5B (40 minutes)
2014
Jan. 1
Machinery ................................................................
114,270
Cash ........................................................................
114,270
To record costs of machinery ($107,800 +$6,470).
Dec. 31
Depreciation Expense—Machinery ............................
17,425
Accumulated Depreciation—Machinery ..............
17,425
To record depreciation [($114,270-$9,720)/6].
2015
Dec. 31
Depreciation Expense—Machinery ............................
27,500*
Accum. Depreciation—Machinery .......................
27,500
To record depreciation.
*2015 depreciation:
Total cost ...................................................................................
$114,270
Less accumulated depreciation (from 2014) ...........................
17,425
Book value .................................................................................
96,845
Less revised salvage value .......................................................
14,345
Remaining cost to be depreciated............................................
$ 82,500
Revised useful life ................................................................
4 yrs.
Less 1 year in 2014 ................................................................
1 yrs.
Revised remaining useful life ...................................................
3 yrs.
Total depreciation for 2015 ($82,500/ 3 yrs) ..............................
$ 27,500
2016
Dec. 31
Depreciation Expense—Machinery ............................
27,500
Accumulated Depreciation—Machinery ..............
27,500
To record depreciation.
Dec. 31
Cash ..............................................................................
25,240
Accumulated Depreciation—Machinery ....................
72,425**
Loss on Disposal of Machinery ................................
16,605***
Machinery ...............................................................
114,270
To record sale of machine.
**Accumulated depreciation on machine at 12/31/2016:
2014 .................................................................................
$ 17,425
2015 .................................................................................
27,500
2016 .................................................................................
27,500
Total ................................................................................
$ 72,425
***Book value of machine at 12/31/2016:
Total cost ........................................................................
$114,270
Less accumulated depreciation ....................................
(72,425)
Book value .....................................................................
$ 41,845
Loss ($25,240 cash received - $41,845 book value).....
$ 16,605
Problem 8-6B (20 minutes)
1.
Jan. 1
Machinery ..................................................................
150,000
Cash .....................................................................
150,000
To record machinery costs.
Jan. 2
Machinery ..................................................................
3,510
Cash .....................................................................
3,510
To record machinery costs.
Jan. 4
Machinery ..................................................................
4,600
Cash .....................................................................
4,600
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
Dec. 31
Depreciation Expense—Machinery ............................
20,000
Accumulated Depreciation—Machinery ..............
20,000
To record the sixth year’s depreciation.
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
a. Sold for $28,000 cash
Dec. 31
Cash ..............................................................................
28,000
Loss on Sale of Machinery .........................................
10,110
Accumulated Depreciation—Machinery ....................
120,000
Machinery ...............................................................
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.
b.
Mar. 21
Machinery ................................................................
400,000
Cash ................................................................
400,000
To record costs of machinery.
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].
d.
Dec. 31
Depreciation Expense—Machinery ............................
25,400
Accum. Depreciation—Machinery .......................
25,400
To record depreciation [$400,000/
4,000,000 tons = $0.10 per ton.
254,000 tons x $0.10 = $25,400].
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.
Differences—They are different in that they apply to different types of long-
term assets: amortization applies to intangible assets (with definite useful
lives); depletion applies to natural resources; and depreciation applies to
plant assets. Also, amortization is typically computed using the straight-
line method, whereas the units-of-production method is routinely used in
depletion.
Problem 8-8B (20 minutes)
1.
2015
(a)
Jan. 1
Leasehold ................................................................
40,000
Cash ........................................................................
40,000
To record payment for sublease.
(b)
Jan. 1
Prepaid Rent................................................................
36,000
Cash ........................................................................
36,000
To record prepaid annual lease rental.
(c)
Jan. 3
Leasehold Improvements ...........................................
20,000
Cash ........................................................................
20,000
To record costs of leasehold improvements.
2.
2015
(a)
Dec. 31
Rent Expense ...............................................................
8,000
Accumulated Amortization—Leasehold ..............
8,000
To record leasehold amortization ($40,000/5).
(b)
Dec. 31
Amortization Expense—Leasehold Improvements .........
4,000
Accumulated Amortization—Leasehold
Improvements ...........................................................
4,000
To record leasehold improvement amortization
($20,000/5 years remaining on lease).
(c)
Dec. 31
Rent Expense ...............................................................
36,000
Prepaid Rent...........................................................
36,000
To record annual lease rental.
©2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 8
493
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
Accumulated Depreciation–Office
Equipment ..............................................
400
2,000
Office Equipment (book value) .................
$ 7,600
$ 6,000
December 31,
2015
December 31,
2016
Computer Equipment ................................
$20,000
$20,000
Accumulated Depreciation–
Computer Equipment ...........................
1,250
6,250
Computer Equipment (book value)...........
$18,750
$13,750
3.
Total asset turnover = Net sales / Average total assets
The 3-month total asset turnover at March 31, 2016:
$44,000 / [($83,460 + $120,268)/2] = 0.43 times (rounded)
©2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Financial and Managerial Accounting, 6th Edition
494
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
2. In Apple’s “Summary of Significant Accounting Policies" (Note 1:
Property, Plant and Equipment) it discloses estimated useful lives by
3. The change in total property and equipment before accumulated
depreciation for the year ended September 28, 2013, is an increase of
$6,632 million ($28,519 – $21,887). In comparison, according to the
4. Total asset turnover for year ended ($ millions):
9/28/2013: = 0.89 times
5. Solution depends on the financial statement data obtained.
$170,910
($207,000 + 176,064)/2
($176,064 + $116,371)/2
©2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 8
495
Comparative Analysis — BTN 8-2
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Apple ($ millions)
Current Year: = 0.89 times
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
produces $0.58 and $0.60 in net sales for the current year and prior
$156,508
($93,798 + $72,574)/2
$170,910
($207,000 + 176,064)/2
