E9–13
(a)
Trademarks
Bal. 1,800
Purch. 216
31 Disposal
End. 1,985
Bal. 31
Amort. 7
(c)
Proceeds on disposal
– Book value of asset sold
Cost
31
Accumulated Amortization
10
= Gain (loss) on disposal
E9–14
Req. 1 Fixed asset turnover ratio: (dollars in millions)
Net
Sales
Average
Net Fixed Assets*
=
Fixed Asset
Turnover
2011
$108,249
($4,768 + $7,777) / 2
17.3
2012
$156,500
($7,777 + $15,450) / 2
13.5
2013
$170,910
($15,450 + $16,600) / 2
10.7
* [(Beginning net fixed assets + Ending net fixed assets) 2]
Req. 2
Apple’s fixed asset turnover ratio in 2013 was 10.7 which was greater than Microsoft’s
ratio of 8.5, suggesting that Apple is more efficient than Microsoft at using its investment
in fixed assets to generate revenue.
End. 28
E9–15
Req. 1
Depreciation Expense for
Book Value at End of *
Method of Depreciation
Year 1
Year 2
Year 1
Year 2
Straight-line ……………………..
$12,000
$12,000
$53,000
$41,000
Units-of-production ……………
16,000
18,000
49,000
31,000
Double-declining-balance …..
26,000
15,600
39,000
23,400
Year 1:
$60,000 x 40,000/150,000
=
$16,000
Year 2:
$60,000 x 45,000/150,000
=
18,000
Double-declining balance:
Year 1:
($65,000 – $0) x 2/5 = $26,000
Year 2:
($65,000 – $26,000) x 2/5 = $15,600
year 1. The fixed asset turnover ratio is calculated as Sales Average Net Fixed Assets,
E9–16
Year 1
Year 2
Year 3
Oil Reserve
$ 3,000,000
$ 3,000,000
$3,000,000
Accumulated Depletion
600,000*
2,400,000†
3,000,000^
Oil Reserve, Net
2,400,000
600,000
0
Oil Inventory
600,000
2,400,000
3,000,000
E9–17
Req. 1
Equipment book value on January 1, 2015:
Original cost: …………………………………………………………
Accumulated Depreciation ………………………………………
Book value ……………………………………………………………
$160,000
(100,000)
60,000
Extraordinary repairs capitalized …………………………………
24,000
New Depreciable Cost ……………………………………………….
$84,000
Years Remaining: 15 – 10 = 5 years
Depreciation 2015 = ($84,000 new depreciable cost – $10,000 residual value) x 1/5
= $14,800
Assets
Liabilities
Stockholders’ Equity
2015
Accumulated
Depreciation
(+xA)
–14,800
Depreciation Expense
(+E)
–14,800
Req. 2
Adjusting Entry on December 31, 2015:
Depreciation Expense ……………………………………………
14,800
Accumulated Depreciation ……………………………
14,800
ANSWERS TO COACHED PROBLEMS
CP9–1
Req. 1
Cost of each machine:
Machine
A
B
C
Total
Purchase price …………………………..
$7,600
$25,600
$9,300
$42,500
Installation costs ………………….……….
200
600
500
1,300
Renovation costs …………………………..
1,500
1,200
1,000
3,700
Total cost ………………………..…
$9,300
$27,400
$10,800
$47,500
Depreciation Expense ($1,740 + $4,620 + $3,600)
9,960
Accumulated Depreciation, Machine A
1,740
Accumulated Depreciation, Machine B
4,620
Accumulated Depreciation, Machine C
3,600
CP9–2
Req. 1
Machine A – Jan. 2:
Cash …………………………..…………………………………………….
20,000
Accumulated Depreciation–Equipment …………………………..
62,400
Gain on Disposal ………………………………………………..
6,200
Equipment ………………………………………………………..
76,200
Req. 2
Machine B – Jan. 2:
Accumulated Depreciation–Equipment ………………………….
13,500
Loss on Disposal ………………………………………………………
6,500
Equipment …………………………………………………………
20,000
CP9–3
Req. 1
Date
Assets
Liabilities
Stockholders’ Equity
Jan. 2
Cash
Vehicle
–20,000
+80,000
Note Payable
(long–term)
+60,000
Jan. 2
Vehicle ………………………………………………………….
80,000
Cash …………………………………………………….
20,000
Note Payable (long-term) ………………………….
60,000
Date
Assets
Liabilities
Stockholders’ Equity
Jan. 8
Accts Payable
+350
Repairs and
Maintenance
Expense (+E)
–350
Jan. 8
Repairs and Maintenance Expense …………………
350
Accounts Payable …………………………..………
350
Date
Assets
Liabilities
Stockholders’ Equity
Jan. 30
Cash
–350
Accts Payable
–350
Jan. 30
Accounts Payable …………………………………………
350
Cash …………………………………………………….
350
Date
Assets
Liabilities
Stockholders’ Equity
Feb. 1
Cash
Equipment
–12,000
+12,000
Feb. 1
Equipment …………………………………………………..
12,000
Cash …………………………………………………….
12,000
CP9–3 (continued)
Req. 1 (continued)
Date
Assets
Liabilities
Stockholders’ Equity
Feb. 8
Cash
–250
R&M Expense (+E)
–250
Feb. 8
Repairs and Maintenance Expense …………………
250
Cash …………………………………………………….
250
Date
Assets
Liabilities
Stockholders’ Equity
Mar. 1
Cash
Land
Building
–20,000
+105,000
+105,000
Note Payable
(long–term)
+190,000
Mar. 1
Land ……………………………………………………………
105,000
Building ……………………………………………………….
105,000
Cash …………………………………………………….
20,000
Note Payable (long-term) …………………………
190,000
Date
Assets
Liabilities
Stockholders’ Equity
Mar. 31
Cash
Equipment
Goodwill
–90,000
+80,000
+10,000
Mar. 31
Equipment …………………………………………………..
80,000
Goodwill ………………………………………………………
10,000
Cash …………………………………………………….
90,000
CP9–3 (continued)
Req. 2
Vehicle (Straight-Line)
Annual
Partial Year
(Cost – Residual Value) x 1/Useful Life
($80,000 – $0) x 1/5
= $16,000
$16,000 x 3/12 = $4,000
Equipment (Straight-Line)
Annual
Partial Year
(Cost – Residual Value) x 1/Useful Life
($12,000 – $0) x 1/5
= $2,400
$2,400 x 2/12 = $ 400
Building (Double-Declining)
Annual
Partial Year
(Cost – Acc. Depn) x 2/Useful Life
($105,000 – $0) x 2/10
= $21,000
$21,000 x 1/12 = $1,750
Fundamentals of Financial Accounting, 5/e 9– 29
© 2016 by McGraw– Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWERS TO GROUP A PROBLEMS
PA9–1
Req. 1
Cost of each machine:
Machine
A
B
C
Total
Purchase price ……………..……………
$ 9,000
$38,200
$22,000
$69,200
Installation costs …………………………..
800
2,100
1,200
4,100
Renovation costs …………..………………
600
1,700
2,200
4,500
Total cost ………………….……….
$10,400
$42,000
$25,400
$77,800
Depreciation Expense ($2,350 + $10,000 + $5,080) …………
17,430
Accumulated Depreciation, Machine A ………………
2,350
Accumulated Depreciation, Machine B ………………
10,000
Accumulated Depreciation, Machine C ………………
5,080
PA9–2
Req. 1
Machine A – Jan. 1:
(a)
Depreciation expense in current year– none recorded because
disposal date was Jan. 1 (beginning of year).
(b)
To record disposal:
Cash ……………………………………………………………………..
9,000
Accumulated Depreciation–Equipment ………………………
21,600
Gain on Disposal ……………………………………………….
600
Equipment …………………………………………………………
30,000
Req. 2
Machine B – Jan. 1:
(a)
Depreciation expense in current year – none recorded because
disposal date was Jan. 1 (beginning of year).
(b)
To record disposal:
Accumulated Depreciation–Equipment ………………………
44,000
Loss on Disposal …………………………………………………….
15,200
Equipment ………………………………………………………..
59,200