8-65
EXERCISE 8-7B a. (cont.)
The Soda Shop
T-Accounts for 2016
Assets
=
Stockholders’ Equity
Cash
Common Stock
Service Revenue
1.
20,000
2.
1.
20,000
3.
36,000
3.
36,000
4.
Bal.
20,000
Bal.
36,000
5.
Bal.
9,000
Operating Expense
Equip. – Ice Cream Mach.
5.
6,000
2.
20,000
Bal.
6,000
Bal.
20,000
Accumulated Depr.
Salaries Expense
6.
3,000
4.
21,000
Bal.
3,000
Bal. 21,000
Depreciation Expense
6. 3,000
Bal.
3,000
EXERCISE 8-8B
*Depreciation Calculation: (Cost − Accumulated Depr.) x (2 x SL Rate)
SL Rate = 1 5 = 20%
Year 1 ($110,000 − $ -0-) x (2 x .20) = $44,000
8-67
EXERCISE 8-8B (cont.)
Hinds Company
Financial Statements
2016
2017
Income Statements for the Year Ended December 31
Service Revenue
$85,000
$72,000
Depreciation Expense
(44,000)
(26,400)
Net Income
$41,000
$45,600
Balance Sheets as of December 31
Assets
Cash
$ 95,000
$167,000
Equipment
110,000
110,000
Accumulated Depreciation
(44,000)
(70,400)
Total Assets
$161,000
$206,600
Stockholders’ Equity
Common Stock
$120,000
$120,000
Retained Earnings
41,000
86,600
Total Stockholders’ Equity
$161,000
$206,600
Statements of Cash Flows for the Year Ended December 31
Cash Flows From Operating Activities:
Inflow from Customers
$85,000
$ 72,000
Cash Flows From Investing Activities:
Outflow to Purchase Equipment
(110,000)
-0-
Cash Flows From Financing Activities:
Inflow from Stock Issue
120,000
-0-
Net Change in Cash
95,000
72,000
Plus: Beginning Cash Balance
-0-
95,000
Ending Cash Balance
$95,000
$167,000
EXERCISE 8-9B
a. Calculation of Depreciation:
Van Cost $35,000
Sales Tax & Title Fees 1,500
Total Cost $36,500
EXERCISE 8–10B
a.
1. Straight-Line Calculation:
2. Double-Declining Balance Calculation:
(Cost − Accumulated Depreciation) x (2 x Straight-Line Rate)
Straight-Line Rate = 1 5 = .20
Year 1 ($75,000 − $0) x (2 x .20) = $30,000
Year 2 ($75,000 − $30,000) x (2 x .20) = 18,000
8-70
8-71
EXERCISE 8-10B (cont.)
c. 1.
Hill Manufacturing
General Journal
Date
Account Title
Debit
Credit
Yr. 1
Depreciation Expense
12,000
Accumulated Depreciation
12,000
Entries for years 2-5 will be the same.
c. 2.
Hill Manufacturing
General Journal
Date
Account Title
Debit
Credit
Yr. 1
Depreciation Expense
30,000
Accumulated Depreciation
30,000
Yr. 2
Depreciation Expense
18,000
Accumulated Depreciation
18,000
Yr. 3
Depreciation Expense
10,800
Accumulated Depreciation
10,800
Yr. 4
Depreciation Expense
1,200
Accumulated Depreciation
1,200
8-72
EXERCISE 8-11B
a. Historical Cost $50,000
Less: Accumulated Depreciation (41,000)
Book Value $ 9,000
8-73
EXERCISE 8-12B
Heflin Enterprises
2017 Accounting Equation
Assets
=
Stockholders’ Equity
Event
Cash
Land
=
Common
Stock
+
Retained
Earnings
a.1
+22,500
(20,000)
=
2,500
b.1
+18,500
(20,000)
=
(1,500)
a. 1) See above.
(2) Gain of $2,500 ($22,500 sales price − $20,000 cost).
(3) Cash inflow from investing activities, $22,500.
(2) Loss of $1,500 ($18,500 sales price − $20,000 cost).
(3) Cash inflow from investing activities, $18,500.
8-74
EXERCISE 8-13B
a. Double-Declining Balance
(Cost − Accum. Depr.) x (2 x SL Rate) = Depr. Exp. Per Year
SL Rate = 1 5 = .20
2016: ($47,000 − $0) x (2 x .20) = $18,800
8-75
EXERCISE 8-13B (cont.)
c. Calculation of Book Value
Double-Declining Balance
Cost $47,000
8-76
EXERCISE 8–14B
a. MACRS depreciation = Cost x MACRS Table %
8-77
EXERCISE 8-15B
Depreciation
Expense
2016: $72,500 − $12,500 = $60,000; $60,000 3 = $20,000
8-78
EXERCISE 8-16B
Shredding Machine:
Book value would still be $6,000; the $1,900 repair cost will be
expensed.
8-79
EXERCISE 8–17B
a.
Assets
=
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
Cash
+
Book Value of
Forklift
=
C. Stock
+
Ret. Ear.
15,000
+
80,000
=
45,000
+
50,000
NA
−
NA
=
NA
NA
( 9,000)
+
=
NA
+
(9,000)
NA
−
9,000
=
(9,000)
(9,000) OA
Assets
=
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
Cash
+
Book Value of
Forklift
=
C. Stock
+
Ret. Ear.
15,000
+
80,000
=
45,000
+
50,000
NA
−
NA
=
NA
NA
( 9,000)
+
9,000
=
NA
+
NA
NA
−
NA
=
NA
(9,000) IA
Assets
=
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
Cash
+
Book Value of Forklift
=
C. Stock
+
Ret. Ear.
15,000
+
80,000
=
45,000
+
50,000
NA
−
NA
=
NA
NA
( 9,000)
+
9,000
=
NA
+
NA
NA
−
NA
=
NA
(9,000) IA
8-80
EXERCISE 8-18B
2017.
b. $22,000 of expense would be recognized in 2016 and $-0- in 2017.
c. $-0- cash outflow from operating activities in 2016, $-0- cash outflow
2017.
EXERCISE 8-19B
a. Depletion charge per unit: $800,000 1,200,000 cubic yds = $.67* per
cubic yd.
*rounded
b.
Depletion Calculation:
Year 1 $.67 x 650,000 = $435,500
8-82
EXERCISE 8-20B
a. Patent $48,000 5 = $9,600 per year
The goodwill is not amortized.
b.
Garth Manufacturing
Statements Model
Assets
=
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flow
Cash
+
Patent
+
Goodwill
=
94,000
+
NA
+
NA
=
94,000
NA
−
NA
=
NA
NA
Acq.
(83,000)
+
48,000
+
35,000
=
NA
NA
−
NA
=
NA
(83,000) IA
Pat.
NA
+
(9,600)
+
NA
=
(9,600)
NA
−
9,600
=
(9,600)
NA
c.
Account Titles
Debit
Credit
Patents
48,000
Goodwill
35,000
Cash
83,000
Account Titles
Debit
Credit
Amortization Expense – Patents
9,600
Patents
9,600
EXERCISE 8-21B
a. Acquisition Price:
Cash Paid $275,000
Liabilities Assumed 10,000
8-84