8-18
plant, and equipment in total assets amd thus more depreciation
8-19
EXERCISE 8-1A
Note: There are many possibilities for answers to this question. The
answers given are only a few examples of long-term operational assets
that these companies may own. Also note that even though the
8-20
EXERCISE 8-2A
Yes/No
a.
No
b.
Yes
c.
Yes
d.
No
e.
No
f.
Yes
g.
Yes
h.
Yes
i.
Yes
j.
No
k.
Yes
l.
Yes
8-21
EXERCISE 8-3A
Tangible (T) Intangible (I)
a. Pizza Oven
T
b. Land
T
c. Franchise
I
d. Filing Cabinet
T
e. Copyright
I
f. Silver Mine
T
g. Office Building
T
h. Drill Press
T
i. Patent
I
j. Oil Well
T
k. Desk
T
l. Goodwill
I
EXERCISE 8-4A
a.
Costs that are to be capitalized:
List Price $140,000
EXERCISE 8-5A
a. % of* Purchase Allocated
Total Appraised Value App. Val. Price Cost
Land $320,000 .40 x $700,000 = $280,000
8-24
EXERCISE 8-6A
a.
Asset
Appraised
Value
Percent of
Appraised Value
Purchase
Price
Allocated
Cost
Land
$180,000
30%
x
$500,000
=
$150,000
Building
300,000
50%
x
500,000
=
250,000
Furniture
120,000
20%
x
500,000
=
100,000
Total
$600,000
100%
$500,000
b.
Assets
=
Equity
Rev.
−
Exp.
=
Net. Inc.
Cash Flow
Cash
+
Land
+
Building
+
Furn.
=
(500,000)
+
150,000
+
250,000
+
100,000
=
NA
NA
−
NA
=
NA
(500,000) IA
c.
Account Titles
Debit
Credit
Land
150,000
Building
250,000
Furniture
100,000
Cash
500,000
8-25
EXERCISE 8-7A
a.
Gulf Seafood
General Journal
Event
Account Titles
Debit
Credit
1.
Cash
60,000
Common Stock
60,000
2.
Equipment – Cooktop
40,000
Cash
40,000
3.
Cash
72,000
Sales Revenue
72,000
4.
Salaries Expense
25,000
Cash
25,000
5.
Depreciation Expense*
9,000
Accumulated Depreciation
9,000
8-26
EXERCISE 8-7A a. (cont.)
Gulf Seafood
T-Accounts for 2016
Assets
=
Stockholders’ Equity
Cash
Common Stock
Service Revenue
1.
60,000
2.
40,000
1.
60,000
3.
72,000
3.
72,000
4.
25,000
Bal.
60,000
Bal.
72,000
Bal.
67,000
Salaries Expense
Equipment – Cooktop
4.
25,000
2.
40,000
Bal.
25,000
Bal.
40,000
Accumulated Depr.
Depreciation Expense
5.
9,000
5.
9,000
Bal.
9,000
Bal. 9,000
b.
Gulf Seafood
Balance Sheet
As of December 31, 2016
Assets
Cash
$67,000
Equipment – Cooktop
$40,000
Less: Accumulated Depreciation
(9,000)
31,000
Total Assets
$98,000
Liabilities
$ -0-
Stockholders’ Equity
Common Stock
$60,000
Retained Earnings
38,000
Total Stockholders’ Equity
98,000
Total Liab. and Stockholders’ Equity
$98,000
8-27
8-28
EXERCISE 8-7A b. (cont.)
Gulf Seafood
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Cash Receipts from Revenue
$ 72,000
Cash Payment for Salaries
(25,000)
Net Cash Flow from Operating Activities
$47,000
Cash Flows From Investing Activities:
Cash Outflow for Cooktop
$(40,000)
Net Cash Flow from Investing Activities
(40,000)
Cash Flows From Financing Activities:
Cash Receipts from Issue of Stock
$ 60,000
Net Cash Flow from Financing Activities
60,000
Net Change in Cash
67,000
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$67,000
EXERCISE 8-8A
Depreciation Calculation: (Cost − Accumulated Depr.) x (2 x SL Rate)
SL Rate = 1 6 = .16667
Year 1 ($120,000 − $ -0-) x (2 x .16667) = $40,000*
8-30
EXERCISE 8-8A (cont.)
Golden Manufacturing Company
Financial Statements
2016
2017
Income Statements
Sales Revenue
72,000
$83,000
Depreciation Expense
(40,000)
(26,667)
Net Income
$32,000
$56,333
Balance Sheets
Assets
Cash
$ 102,000
$185,000
Equipment
120,000
120,000
Accumulated Depreciation
(40,000)
(66,667)
Total Assets
$182,000
$238,333
Stockholders’ Equity
Common Stock
$150,000
$150,000
Retained Earnings
32,000
88,333
Total Stockholders’ Equity
$182,000
$238,333
Statements of Cash Flows
Cash Flows From Operating Activities:
Inflow from Customers
$ 72,000
$ 83,000
Cash Flows From Investing Activities:
Outflow to Purchase Equipment
(120,000)
-0-
Cash Flows From Financing Activities:
Inflow from Stock Issue
150,000
-0-
Net Change in Cash
102,000
83,000
Plus: Beginning Cash Balance
-0-
102,000
Ending Cash Balance
$102,000
$185,000
EXERCISE 8-9A
a. Calculation of Depreciation:
Taxi Cost $36,000
Sales Tax & Title Fees 1,200
Total Cost $37,200
EXERCISE 8-10A
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 ($52,000 − $0 ) x (2 x .20) = $20,800
Year 2 ($52,000 − $20,800) x (2 x .20) = 12,480
8-33
EXERCISE 8-10A (cont.)
c. 1.
Copeland Drugstore
General Journal
Date
Account Title
Debit
Credit
Yr. 1
Depreciation Expense
9,000
Accumulated Depreciation
9,000
Entries for years 2-5 will be the same.
c. 2.
Copeland Drugstore
General Journal
Date
Account Title
Debit
Credit
Yr. 1
Depreciation Expense
20,800
Accumulated Depreciation
20,800
Yr. 2
Depreciation Expense
12,480
Accumulated Depreciation
12,480
Yr. 3
Depreciation Expense
7,488
Accumulated Depreciation
7,488
Yr. 4
Depreciation Expense
4,232
Accumulated Depreciation
4,232
Yr. 5
No entry
8-34
EXERCISE 8-11A
a. Historical Cost $23,000
Less: Accumulated Depreciation (12,000)
8-35
EXERCISE 8-12A
Prairie Enterprises
2018 Accounting Equation
Assets
=
Stockholders’ Equity
Event
Cash
Land
=
Common
Stock
+
Retained
Earnings
a.1
+29,500
(28,000)
=
1,500
Cash
Land
Common
Stock
Retained
Earnings
b.1
+24,000
(28,000)
=
+(4,000)
a. (1) See above.
(2) Gain of $1,500 ($29,500 sales price − $28,000 cost).
(3) Cash inflow from investing activities, $29,500.
(2) Loss of $4,000 ($24,000 sales price − $28,000 cost).
(3) Cash inflow from investing activities, $24,000.
8-36
EXERCISE 8-13A
a. Double-Declining Balance
(Cost − Accum. Depr.) x (2 x SL Rate) = Depr. Exp. Per Year
SL Rate = 1 4 = .25
2016: ($38,000 − $0) x (2 x .25) = $19,000
8-37
EXERCISE 8-13A (cont.)
c. Calculation of Book Value
Double-Declining Balance
Cost $38,000