Accounting Chapter 10 Homework July Purchased Equipment For 2500000 Dec Retired

E10-6 Determine depreciation for partial periods

Rottino Company purchased a new machine on October 1, 2017, at a cost of $150,000.

The company estimated that the machine will have a salvage value of $12,000. The

machine is expected to be used for 10,000 working hours during its 5-year life.

Instructions

Compute the depreciation expense under the following methods for the year indicated.

(a) Straight-line for 2017.

(b) Units-of-activity for 2017, assuming machine usage was 1,700 hours.

(c) Declining-balance using double the straight-line rate for 2017 and 2018.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .

(a) Straight-line method

Cost Value

Less: Salvage value Value

Depreciable cost ?

Useful life (years) Value

Annual depreciation ?

2017 Depreciation:

Annual Depreciation Value

Months machine in use Value

2017 partial year depreciation ?

(b) Units-of-activity method

Cost Value

Less: Salvage value Value

Depreciable cost ?

Useful life (hours) Value

Depreciable cost/hour ?

2017 Depreciation:

Depreciable cost/hour Value

Hours machine used Value

2017 depreciation expense ?

(c) Declining-balance method:

Straight-line rate Value

Double the straight-line rate Value

2017 Depreciation:

Cost Value

Double the straight-line rate ?

2017 full year depreciation Value

Number of months in use Value

2017 partial year depreciation ?

2018 Depreciation:

Cost Value

Less: accumulated depreciation, 2017 Value

Ending book value, 2017 ?

Beginning book value, 2018 Value

Double the straight-line rate Value

2018 depreciation expense ?

After you have completed the requirements of E10-6, consider the additional questions.

Answers are on the other tab in this file.

1 Assume the cost of the asset changed to $180,000. Recompute straight-line depreciation for 2017.

2Assume that the cost of the asset changed to $180,000 and the machine usage for 2017

changed to 2,100 hours. Recompute 2017 depreciation using the units-of-activity method.

3. Assume that the cost of the asset changed to $180,000. Recompute 2017 and 2018 declining-balance

depreciation using double the straight line rate.

E10-6 Solution

(a) Straight-line method

Cost $150,000

Less: Salvage value 12,000

Depreciable cost 138,000

(b) Units-of-activity method

Cost $150,000

Less: Salvage value 12,000

Depreciable cost 138,000

(c) Declining-balance method:

Straight-line rate 20%

Double the straight-line rate 40%

2017 Depreciation:

Cost $150,000

Double the straight-line rate 40%

2018 Depreciation:

Cost $150,000

Less: accumulated depreciation, 2017 15,000

Ending book value, 2017 $135,000

E10-6 Solution to additional questions

1 Assume the cost of the asset changed to $180,000. Recompute straight-line depreciation for 2017.

(a) Straight-line method

Cost $180,000

Less: Salvage value $12,000

Depreciable cost $168,000

2Assume that the cost of the asset changed to $180,000 and the machine usage for 2017

changed to 2,100 hours. Recompute 2017 depreciation using the units-of-activity method.

(b) Units-of-activity method

Cost $180,000

Less: Salvage value 12,000

3. Assume that the cost of the asset changed to $180,000. Recompute 2014 and 2015 declining-balance

depreciation using double the straight line rate.

(c) Declining-balance method:

Straight-line rate 20%

Double the straight-line rate 40%

2018 Depreciation:

Cost $180,000

Less: accumulated depreciation, 2017 18,000

Ending book value, 2017 $162,000

P10-1A Determine acquisition costs of land and building

Venable Company was organized on January 1. During the first year of operations, the following

plant asset expenditures and receipts were recorded in random order.

Debit

1. Cost of filling and grading the land $4,000

2. Full payment to building contractor 690,000

3. Real estate taxes on land paid for the current year 5,000

4. Cost of real estate purchased as a plant site

(land $100,000 and building $45,000) 145,000

5. Excavation costs for new building 35,000

6. Architect’s fees on building plans 10,000

7. Accrued real estate taxes paid at time of purchase of real estate 2,000

8. Cost of parking lots and driveways 14,000

9. Cost of demolishing building to make land suitable for construction

of new building 25,000

$930,000

Credit

10. Proceeds from salvage of demolished building $3,500

Instructions

Analyze the foregoing transactions using the following column headings. Insert the number of

each transaction in the Item space, and insert the amounts in the appropriate columns. For

amounts entered in the Other Accounts column, also indicate the account titles.

Item Land Buildings Other Accounts

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .

Insert the amounts in the appropriate columns. For amounts entered in the Other Accounts

column, also indicate the account titles.

Item Land Building

1Value

2Value

3Value

4Value

5Value

6Value

7Value

8Value

9Value

10 Value

? ?

After you have completed the requirements of P10-1A, consider the additional questions.

Answers are on the other tab in this file.

1 Assume the proceeds from salvage of demolished building increased to $8,000.

How does this change the total cost of land or building?

2Assume that real estate taxes on land for the current year increased to $6,000.

How will this affect the cost of land?

Other Accounts

Account

P10-1A Solution

Insert the amounts in the appropriate columns. For amounts entered in the Other Accounts

column, also indicate the account titles.

Item Land Building

1 $4,000

2 $690,000

3 $5,000

4 145,000

Other Accounts

Property Tax Expense

P10-1A Solution to additional problems

1 Assume the proceeds from salvage of demolished building increased to $8,000.

How does this change the total cost of land or building?

Item Land Building

1 $4,000

2 $690,000

3 $5,000

4 145,000

5 35,000

2Assume that real estate taxes on land for the current year increased to $6,000.

How will this affect the cost of land?

Item Land Building

1 $4,000

2 $690,000

3$6,000

Property Tax Expense

Other Accounts

Property Tax Expense

P10-5A Journalize a series of equipment transactions related to purchase, sale, retirement, and depreciation

At December 31, 2017, Grand Company reported the following as plant assets.

Land $4,000,000

Buildings $28,500,000

Less: Accumulated depreciation – buildings 12,100,000 16,400,000

Equipment 48,000,000

Less: Accumulated depreciation – equipment 5,000,000 43,000,000

Total plant assets $63,400,000

During 2018, the following selected cash transactions occurred.

April 1 Purchased land for $2,130,000.

May 1 Sold equipment that cost $750,000 when purchased on January 1, 2014. The

equipment was sold for $450,000.

June 1 Sold land purchased on June 1, 2008 for $1,500,000. The land cost $400,000.

July 1 Purchased equipment for $2,500,000.

Dec. 31 Retired equipment that cost $500,000 when purchased on December 31, 2008.

No salvage value was received.

Instructions

(a) Journalize the above transactions. The company uses straight-line depreciation for

buildings and equipment. The buildings are estimated to have a 50-year life and no

salvage value. The equipment is estimated to have a 10-year useful life and no

salvage value. Update depreciation on assets disposed of at the time of sale or

retirement.

(b) Record adjusting entries for depreciation for 2018.

(c ) Prepare the plant assets section of Grand’s balance sheet at December 31, 2018.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .

(a) April 1 Value Value

May 1 Value Value

May 1 Value

Value Value

Value

June 1 Value Value

Value

July 1 Value Value

Account

Dec. 31 Value Value

(b) Dec. 31 Value Value

Dec. 31 Value Value

(c)

Plant Assets Value

Land

Buildings Value

Less: Accumulated depreciation -buildings Value ?

Equipment Value

Less: Accumulated depreciation -equipment Value ?

Total plant assets ?

After you have completed the requirements of P10-5A, consider the additional questions.

Answers are on the other tab in this file.

1

Assume the sales proceed from the May 1 sale of equipment changed to $410,000.

What is the impact on the journal entry on the Equipment account?

2. Suppose the cost of the equipment purchased on July 1 changed to $2,150,000.

What is the impact on the journal entry recording the transaction, the adjusting entry

to record depreciation and the plant assets section of the balance sheet?

December 31, 2018

Account

GRAND COMPANY

Partial Balance Sheet

Account

P10-5A Solution

(a) April1 2,130,000 2,130,000

May 1 25,000

25,000

June 1 1,500,000

400,000

1,100,000

50,000

Accumulated Depreciation –

Equipment

Accumulated Depreciation –

Equipment

July 1 2,500,000

2,500,000

Cash

Land

Gain on Disposal of Plant Assets

Equipment

Cash

Land

Cash

Depreciation Expense

Accumulated Depreciation –

Equipment

Accumulated Depreciation –

Equipment

(b) Dec. 31 570,000

570,000

Depreciation Expense

Cost $28,500,000 X 1/50 = $570,000

(c)

*See T-accounts which follow.

Bal. 4,000,000 June 1 400,000 Bal. 28,500,000

Apr. 1 2,130,000 Bal. 28,500,000

Bal. 5,730,000

Land

Buildings

December 31, 2018

Partial Balance Sheet

Depreciation Expense

Accumulated Depreciation – Buildings

GRAND COMPANY

May 1 325,000 Bal. 5,000,000

Dec.31 500,000 May 1 25,000

P10-5A Solution to the additional questions

1 Assume the sales proceed from the May 1 sale of equipment changed to $410,000.

What is the impact on the journal entry on the Equipment account?

May 1 410,000

325,000

2. Suppose the cost of the equipment purchased on July changed to $2,150,000. What is the impact

on the journal entry recording the transaction, the adjusting entry to record depreciation and

and the plant assets section of the balance sheet?

July 1 2,150,000 2,150,000

Dec. 31 4,782,500

4,782,500

Plant Assets*

Land $5,730,000

Buildings $28,500,000

Accumulated Depreciation –

GRAND COMPANY

Partial Balance Sheet

December 31, 2018

Cash

Accumulated Depreciation –

Depreciation Expense

Equipment

Cash

Bal. 48,000,000 May 1 750,000 May 1 325,000 Bal. 5,000,000

July 1 2,150,000 Dec. 31 500,000 Dec.31 500,000 May 1 25,000

Equipment

Accumulated Depreciation -Equipment

P10-6A Record disposals

Ceda Co. has equipment that cost $80,000 and that has been depreciated $50,000.

Instructions

Record the disposal under the following assumptions.

(a) It was scrapped as having no value.

(b) It was sold for $21,000.

(c ) It was sold for $31,000.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .

(a) Cost Value

Less: accumulated depreciation Value

Book Value ?

Journal entry:

Account Value

Account Value Value

(b) Cost Value

Less: accumulated depreciation Value

Book Value ?

Sales Proceed Value

Loss on disposal ?

Journal entry:

Account Value

Account Value Value

(c ) Cost Value

Less: accumulated depreciation Value

Book Value ?

Sales Proceed Value

Gain on disposal ?

Journal entry:

Account Value

Account Value Value

Value

After you have completed the requirements of P10-6A, consider the additional questions.

Answers are on the other tab in this file.

1. Assume the accumulated depreciation on the asset was $65,000. What is the impact on the journal entry in (b) above?

2. Assume the asset was sold for $27,500. What is the impact on the journal entry in (c ) above?

Account

P10-6A Solution

(a) Cost $80,000

Less: accumulated depreciation 50,000

(b) Cost $80,000

Less: accumulated depreciation 50,000

Book Value 30,000

(c ) Cost $80,000

Less: accumulated depreciation 50,000

Book Value 30,000

Problem 10-6A Solution to additional questions

1. Assume the accumulated depreciation on the asset was $65,000. What is the impact on the journal entry in (b) above?

(b) Cost $80,000

Less: accumulated depreciation 65,000

Book Value 15,000

2. Assume the asset was sold for $27,500. What is the impact on the journal entry in (c ) above?

(c) Cost $80,000

Less: accumulated depreciation 50,000

Book Value 30,000