PROBLEM 10-3C
(a) (1) Purchase price ……………………………………………………….. $ 46,500
Sales tax ………………………………………………………………… 2,200
Shipping costs ……………………………………………………….. 175
Insurance during shipping ………………………………………. 75
(2) Recorded cost ………………………………………………………… $ 49,000
Less: Salvage value ……………………………………………….. 5,000
Depreciable cost …………………………………………………….. $ 44,000
(b) (1) Recorded cost ………………………………………………………… $120,000
Less: Salvage value ……………………………………………….. 8,000
Depreciable cost …………………………………………………….. $112,000
(2)
Year
Book Value at
Beginning of
Year
DDB Rate
Accumulated
Depreciation
2017
2018
$120,000
60,000
*50%*
*50%*
$ 60,000
90,000
PROBLEM 10-3C (Continued)
(3) Depreciation cost per unit = ($120,000 – $8,000)/25,000 units =
$4.48 per unit.
Annual Depreciation Expense
2017: $4.48 X 6,500 = $29,120
2018: 4.48 X 7,500 = 33,600
(c) The straight-line method reports the lowest amount of depreciation
expense the first year while the declining-balance method reports the
highest. In the fourth year, the declining-balance method reports the
lowest amount of depreciation expense while the straight-line method
reports the highest.
These facts occur because the declining–balance method is an accelerated
depreciation method in which the largest amount of depreciation is
recognized in the early years of the asset’s life. If the straight–line method
PROBLEM 10-4C
Year
Depreciation
Expense
Accumulated
Depreciation
2015
2016
2017
$12,000(a)
12,000
9,600(b)
$12,000
24,000
33,600
(a)
$80,000 –$8,000
6 years
= $12,000
5 years
$27,200 –$4,000
2 years
PROBLEM 10-5C
(a) Apr. 1 Land …………………………………………. 2,200,000
Cash …………………………………… 2,200,000
May 1 Depreciation Expense ………………… 30,000
Accumulated Depreciation—
Equipment
($900,000 X 1/10 X 4/12) ……. 30,000
Cost $900,000
Accum. depreciation—
equipment 390,000
[($900,000 X 1/10 X 4) + $30,000]
Book value 510,000
Cash proceeds 540,000
Gain on disposal $ 30,000
June 1 Cash …………………………..…………….. 1,800,000
Land …………………………………… 600,000
Gain on Disposal of
Plant Assets ……………………. 1,200,000
31 Accumulated Depreciation—
Equipment …………………………..…. 500,000
Equipment ………………………….. 500,000
PROBLEM 10-5C (Continued)
Cost $500,000
Accum. depreciation—
equipment 500,000
($500,000 X 1/10 X 10)
Book value $ 0
(b) Dec. 31 Depreciation Expense ………………… 530,000
Accumulated Depreciation—
(c) WALLEN COMPANY
Partial Balance Sheet
December 31, 2018
Plant Assets*
Land …………………………………………….. $ 4,600,000
Buildings ………………………………………. $26,500,000
PROBLEM 10-5C (Continued)
Land
Bal. 3,000,000
Apr. 1 2,200,000
June 1 600,000
Bal. 4,600,000
Accumulated Depreciation—Buildings
Bal. 12,100,000
Dec. 31 adj. 530,000
Bal. 12,630,000
Bal. 40,000,000
May 1 900,000
Accumulated Depreciation—Equipment
May 1 390,000
Dec. 31 500,000
Bal. 8,140,000
Bal. 5,000,000
May 1 30,000
PROBLEM 10-6C
(a) Accumulated Depreciation—Equipment ……………… 24,000
Loss on Disposal of Plant Assets ………………………. 26,000
Equipment …………………………………………………. 50,000
(c) Cash ……………………………………………………………….. 18,000
PROBLEM 10-7C
(a) Jan. 2 Patents …………………………………………… 27,000
Cash ………………………………………… 27,000
Jan.– Research and Development
June Expense ……………………………………… 140,000
Cash ………………………………………… 140,000
(b) Dec. 31 Amortization Expense ……………………… 9,000
Patents ……………………………………. 9,000
[($60,000 X 1/10) + ($27,000 X 1/9)]
(c) Intangible Assets
Patents ($87,000 cost – $15,000 amortization) (1) …………… $ 72,000
Copyrights ($156,000 cost – $18,600 amortization) (2) ……. 137,400
Total intangible assets …………………………………………… $209,400
PROBLEM 10-8C
1. Research and Development Expense …………………. 95,000
Patents ………………………………………………………. 95,000
PROBLEM 10-9C
(a)
Glover Corp.
Lounsbury Corp.
Asset turnover
$1,500,000
$2,000,000
= .75 times
$1,260,000
$1,500,000
= .84 times