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
Refrigerators
5
$33,000
$4,500
$28,500
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
2021
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