Problem 11–13
Requirement 1
Hecala’s cost of the mineral mine is $13,721,871, determined as follows:
Mining site $10,000,000
Requirement 2
Depletion:
$13,721,871 800,000 tons = $17.1523 per ton
11–82 Intermediate Accounting, 8/e
Problem 11–13 (continued)
Requirement 3
Requirement 4
Requirement 5
A change in the service life of plant and equipment and finite-life intangible
Problem 11–13 (concluded)
2017 Depreciation of equipment:
Original cost $140,000
Less: 2016 depreciation (19,500)
2017 Depreciation of structures:
Original cost $68,000
11–84 Intermediate Accounting, 8/e
Analysis Case 11–1
The terms depreciation, depletion, and amortization all refer to the same process
of allocating the cost of property and equipment and finite-life intangible assets to the
periods benefited by their use. However, each term is applied to a different type of
CASES
Communication Case 11–2
Suggested Grading Concepts and Grading Scheme:
Content (70%)
_____ 50 Explains the concept of depreciation as a process of
cost allocation, not valuation.
____ Rational match versus market fluctuations.
____ Numerical example.
_____ 10 Purpose of the balance sheet is to provide information about
financial position, not to directly measure company value.
_____ 10 Purpose of the income statement is to provide cash flow
information, not to directly measure the change in company
value.
____
_____ 70 points
Writing (30%)
_____ 6 Terminology and tone appropriate to the audience of
a company president.
_____ 12 Organization permits ease of understanding.
____ Introduction that states purpose.
____ Paragraphs that separate main points.
_____ 12 English
____ Sentences grammatically clear and well organized,
concise.
____ Word selection.
____ Spelling.
____ Grammar and punctuation.
____
_____ 30 points
11–86 Intermediate Accounting, 8/e
Judgment Case 11–3
Requirement 1
Portland should have selected the straight-line depreciation method when
approximately the same amount of an asset’s service potential is used up each period.
Requirement 2
a. By associating depreciation with a group of machines instead of each
individual machine, Portland’s bookkeeping process is greatly simplified. Also, since
Judgment Case 11–4
Requirement 1
a. The capitalized cost for the computer includes all costs reasonable and
Requirement 2
The rationale for using accelerated depreciation methods is based on the
assumption that an asset is more productive in the earlier years of its estimated useful
Judgment Case 11–5
There is no necessarily correct answer to the question. The support made for the
answer given is more important than the answer itself. Materiality is the critical
consideration.
11–88 Intermediate Accounting, 8/e
Communication Case 11–6
There is no right or wrong answer to this case. Both views, expense and
capitalize, can be defended once consideration is given to the materiality issue. The
Integrating Case 11–7
Requirement 1
a. ($ in millions)
Inventory (understatement of 2017 beginning inventory) …….. 10
Retained earnings (understatement of 2016 income)……… 10
2017 adjusting entry:
c.
2017 adjusting entry:
($ in millions)
SYD
2015 depreciation $10 ($30 x 5/15)
11–90 Intermediate Accounting, 8/e
Case 11–7 (concluded)
Requirement 2
Shareholders’ Net
Assets Liabilities Equity Income Expenses
2015 $640 $330 $310 $210 $150
Judgment Case 11–8
Requirement 1
A change from the sum-of-the-years’-digits method of depreciation to the
straight-line method for previously recorded assets is a change in accounting principle
Requirement 2
A change in the expected service life of an asset arising because of more
11–92 Intermediate Accounting, 8/e
Research Case 11–9
Requirement 1
Requirement 2
Requirement 3
Determining whether to record an impairment loss and actually recording the loss
Requirement 4
Property, plant, and equipment and finite-life intangible assets to be sold should
be classified as held-for-sale in the period in which all of the following criteria are
met:
Case 11–9 (concluded)
Requirement 5