Exercise 11–11
Requirement 1
To update depreciation in 2018; 2 months of service to date of disposal.
……………………………………….Accumulated depreciation
Requirement 2
To record the sale of the truck.
Cash …………………………………………………………………….. 58,000
………………………………………………Truck (account balance)
* July 1, 2013 to March 1, 2018 = 56 months.
Requirement 3
To record the sale of the truck.
………………………………………………Truck (account balance)
……………………………………..Gain on sale of truck (difference)
* July 1, 2013 to March 1, 2018 = 56 months.
Exercise 11–12
Requirement 1
Consideration received $17,000
*Annual depreciation = ($80,000 – $5,000) / 5 years = $15,000/year
Requirement 2
Cash…………………………………………………………………….. 17,000
Exercise 11–12 (concluded)
Requirement 3
Cash…………………………………………………………………….. 17,000
Accumulated depreciation:
Sum-of-the-digits is ([5 (5 + 1)]/2) = 15
2014 $75,000 × 5/15 × 6/12 = $12,500
2015 $75,000 × 5/15 × 6/12 = $12,500
Consideration received $17,000
Exercise 11–13
Requirement 1
Asset Cost
Residual
Value
Depreciable
Base
Estimated
Life(yrs.)
Depreciation
per Year
(straight line)
Stoves $15,000 $3,000 $12,000 6 $2,000
Requirement 2
To record the purchase of new refrigerators.
……………………………………………………………………..Cash
To record the sale of old refrigerators.
Exercise 11–14
Requirement 1
Cost of the equipment:
Purchase price $154,000
Year
Book Value
Beginning
of Year X
Depreciation
Rate per Year = Depreciation
Book Value
End of Year
2018 $160,000 25% $ 40,000 $120,000
2019 120,000 25% 30,000 90,000
* Switch to straight line in 2022:
Requirement 2
Since there is a policy to switch to straight-line depreciation halfway through
For plant and equipment used in the manufacture of a product, depreciation is a
Exercise 11–15
Requirement 1
$4,500,000
Depletion per ton = = $5.00 per ton
900,000 tons
2018 depletion = $5.00 × 240,000 tons = $1,200,000
Requirement 2
Depletion is part of product cost and is included in the cost of the inventory of
coal, just as the depreciation on manufacturing equipment is included in inventory
cost. The depletion is then included in cost of goods sold in the income statement
when the coal is sold.
Exercise 11–16
Timber tract:
Logging roads:
Exercise 11–17
Requirement 1
Cost of copper mine:
Mining site $1,000,000
†$300,000 × 25% = $ 75,000
*Present value of $1, n = 4, i = 10% (Table 2)
Depletion:
Depreciation:
Requirement 2
Depletion of natural resources and depreciation of assets used in the extraction
of natural resources are part of product cost and are included in the cost of the
inventory of copper, just as the depreciation on manufacturing equipment is
included in inventory cost. The depletion and depreciation are then included in
cost of goods sold in the income statement when the copper is sold.
Exercise 11–18
Requirement 1
a. To record the purchase of a patent.
January 1, 2016
……………………………………………………………………..Cash
To record amortization on the patent.
December 31, 2016 and 2017
……………………………………………………………………Patent
b. To record the purchase of a franchise.
2018
……………………………………………………………………..Cash
c. To record research and development expenses.
2018
……………………………………………………………………..Cash
Exercise 11–18 (concluded)
2018 Year-end adjusting entries
Patent: To record amortization on the patent after change in useful life.
December 31, 2018
……………………………………………………………………Patent
Calculation of annual amortization after the estimate change:
($ in thousands)
$700 Cost
$70 Previous annual amortization ($700 ÷ 10 years)
Franchise: To record amortization of franchise.
December 31, 2018
……………………………………………………………….Franchise
Requirement 2
Intangible assets:
Patent $448,000 [1]
Exercise 11–19
To record the purchase of the patent.
January 2, 2018
……………………………………………………………………..Cash
To record amortization of the patent for the year 2018.
……………………………………………………………………Patent
To record amortization of the patent for the year 2019.
……………………………………………………………………Patent
To record costs of successfully defending the patent infringement suit.
January, 2020
……………………………………………………………………..Cash
Exercise 11–19 (concluded)
To record amortization of the patent for the year 2020.
……………………………………………………………………Patent
Calculation of revised annual amortization:
($ in thousands)
$500 Cost
$62.5 Previous annual amortization ($500 ÷ 8 years)