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Exercise 11–3 (concluded)
5. Units-of-production:
$115,000 – 5,000
= $.50 per unit depreciation rate
220,000 units
Exercise 11–4
Building depreciation:
$5,000,000 – 200,000
Building addition depreciation:
Remaining useful life from June 30, 2016, is 27.5 years.
$1,650,000
= $60,000 per year
Exercise 11–5
Asset A:
Straight-line rate is 20% (1 ÷ 5 years) x 2 = 40% DDB rate
Asset B:
Sum-of-the-years’ digits is 36 {[8 (8 + 1)]÷2}
Asset C:
$65,000 – 5,000
= $6,000
Exercise 11–6
Requirement 1
1. Straight-line:
2. Sum-of-the-years’ digits:
Sum-of-the-years’ digits is ([6 (6 + 1)] ÷ 2) = 21
3. Double-declining balance:
1/6 (the straight-line rate) x 2 = 1/3 DDB rate
Exercise 11–7
Building depreciation:
$8,000,000* – 800,000**
11–24 Intermediate Accounting, 8/e
Furniture and fixtures depreciation:
1/10 or 10% (the straight-line rate) x 2 = 20% DDB rate
Office equipment depreciation:
1/5 or 20% (the straight-line rate) x 2 = 40% DDB rate
Exercise 11–8
Requirement 1
U.S. GAAP:
Requirement 2
IFRS:
11–26 Intermediate Accounting, 8/e
Exercise 11–9
Requirement 1
Requirement 2
($ in thousands) Before After
Revaluation Revaluation
Equipment $240 x 220/210 = $251
Requirement 3
Requirement 4
($ in thousands) Before After
Revaluation Revaluation
Equipment $240 x 195/210 = $223
Exercise 11–10
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.
Refrigerators ................................................................... 2,700
11–28 Intermediate Accounting, 8/e
Exercise 11–11
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
2016
$160,000
25%
$ 40,000
$120,000
Straight-line depreciation:
Requirement 2
For plant and equipment used in the manufacture of a product, depreciation is a
Exercise 11–12
Requirement 1
$4,500,000
Depletion per ton = = $5.00 per ton
Requirement 2
Exercise 11–13
Timber tract:
$3,200,000 – 600,000 = $.52 per board foot
11–30 Intermediate Accounting, 8/e
Exercise 11–14
Requirement 1
Cost of copper mine:
Mining site $1,000,000
*Present value of $1, n = 4, i = 10% (Table 2)
Depletion:
$1,903,939
Depreciation:
$120,000 – 20,000
Depreciation per pound = = $.01 per pound
Requirement 2
Depletion of natural resources and depreciation of assets used in the extraction of
Exercise 11–15
Requirement 1
a. To record the purchase of a patent.
January 1, 2014
b. To record the purchase of a franchise.
2016
Exercise 11–15 (concluded)
2016 Year-end adjusting entries
Patent: To record amortization on the patent after change in useful life.
December 31, 2016
Calculation of annual amortization after the estimate change:
($ in thousands)
$700 Cost
$70 Previous annual amortization ($700 ÷ 10 years)
December 31, 2016
Requirement 2
Intangible assets:
Exercise 11–16
To record the purchase of the patent.
January 2, 2016
Patent .............................................................................. 500,000
Cash ............................................................................ 500,000
January, 2018
Exercise 11–16 (concluded)
To record amortization of the patent for the year 2018.
Calculation of revised annual amortization:
($ in thousands)
$500 Cost
$62.5 Previous annual amortization ($500 ÷ 8 years)
Exercise 11–17
($ in millions)
Calculation of annual amortization after the estimate change:
$ in millions)
$9 Cost
Exercise 11–18
Requirement 1
11–36 Intermediate Accounting, 8/e
Exercise 11–19
Requirement 1
Depreciation expense (determined below) .......................... 3,088
Calculation of annual depreciation after the estimate change:
$40,000 Cost
$7,200 Previous annual depreciation ($36,000 ÷ 5 years)
Requirement 2
Calculation of annual depreciation after the estimate change:
$40,000 Cost
Previous depreciation:
Exercise 11–20
SYD depreciation
[10 + 9 + 8 x ($1.5 – .3) million] = $589,091
55
$1,500,000 Cost
Adjusting entry (2016 depreciation):
Depreciation expense (calculated above) ........................... 87,273
Exercise 11–21
Requirement 1
In general, we report voluntary changes in accounting principles retrospectively.
However, a change in depreciation method is considered a change in accounting
Requirement 2
Asset’s cost $2,560,000
Adjusting entry:
Exercise 11–22
Requirement 1
Analysis:
Correct Incorrect
(Should Have Been Recorded) (As Recorded)
2013 Equipment 350,000 Expense 350,000
Cash 350,000 Cash 350,000
To correct incorrect accounts
Requirement 2
Correcting entry:
11–40 Intermediate Accounting, 8/e
Exercise 11–23
Requirement 1
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