Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
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
Annual
Depreciation
Expense
Accumulated
Depreciation
2017
2018
$120,000
60,000
*50%*
*50%*
$60,000
30,000
$ 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
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
Accumulated Depreciation—Equipment
May 1 390,000
Dec. 31 500,000
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
