16
Accounting for Property,
Plant, Equipment, and
Intangible Assets
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
2. The Land Improvements account records improvements to land with a limited useful
3. Revenue expenditures relate to expenses that do not extend the plant asset’s
4. Straight-line: Depreciation expense is the same amount each year. Units-of-
production:
6. False; it is a capital expenditure.
8. Disagree. If cash received is less than the book value, a loss results.
10. It is a contra-asset that recorded the amount of depletion accumulated.
12. The question in this case is whether the dealer is being fair to Pete. It does not
seem that the dealer is telling Pete the truth about buying a car. Most cars do not
SOLUTIONS TO CONCEPT CHECKS
1. The total cost of the machine is $3,599.00
3. The book value of the machine is $5,770.00.
5. The depreciation for year 1 using double declining-balance is $4,800.00.
6.
Situation
Capital
Expenditure
Revenue
Expenditure
Addition
Betterment/
Extraordinary
Repair
a. New truck engine replaced
X
X
7. Account Category Financial Statement Found
8. a. What is the book value of the old machine? $9,400
What is the Gain? $3,690
9. a. What is the book value of the old machine? $9,400
b.
Machinery (new)
19,100
SOLUTIONS TO SET A EXERCISES
16A–1.
16A–2.
(a) Straight-Line
Year
Cost
Depreciation
Expense
Accumulated
Depreciation
End of Year
Book Value
End of Year
(b) Units-of-Production
Year
Cost
Output
Depreciation
Expense
Accumulated
Depreciation
Book Value
$354
$590
(c) Double Declining- Balance
Year
Cost
Accumulated
Depreciation
Beginning of
Year
Book Value
Beginning
of Year
Depreciation
Expense
Accumulated
Depreciation
End of Year
Book
Value
End of
Year
$740
$740
$370
$1,110
$370
16A-3.
(a)Straight-Line
Year
Cost
Depreciation
Expense
Accumulated
Depreciation
End of Year
Book Value
End of Year
(b)Double Declining-Balance
Accumulated
Depreciation
Book Value
Accumulated
Depreciation
Book
Value
Yr.
Cost
Beginning of
Beginning
Depreciation
End of Year
End of
EXERCISES (CONTINUED)
16A-4.
2018
16A-5.
The depreciation for year 1 is $1,700.00.
SOLUTIONS TO SET B EXERCISES
16B-1.
The actual cost of the machine is $34,642.
16B–2.
(a) Straight-Line
Year
Cost
Depreciation
Expense
Accumulated
Depreciation
End of Year
Book Value
End of Year
(b) Units-of-Production
Year
Cost
Output
Depreciation
Expense
Accumulated
Depreciation
Book Value
(c) Double Declining- Balance
Year
Cost
$355
$1,065
$355
Accumulated
Depreciation
Beginning of
Book Value
Beginning
Depreciation
Expense
Accumulated
Depreciation
Book
Value
End of
16B–3.
(a)Straight-Line
Year
Cost
Depreciation
Expense
Accumulated
Depreciation
End of Year
Book Value
End of Year
(b)Double Declining-Balance
Accumulated
Depreciation
Book Value
Accumulated
Depreciation
Book
Value
Yr.
Cost
Beginning of
Year
Beginning
of Year
Depreciation
Expense
End of Year
End of
Year
EXERCISES (CONTINUED)
16B-4.
2018
16B-5.
The depreciation for year 1 is $1,800.00.
SOLUTIONS TO SET A PROBLEMS
PROBLEM 16A-1 YELLOW COMPANY
GENERAL JOURNAL PAGE 4
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Feb.
5
Land
94
0
0
0
00
Cash
94
0
0
0
00
18
Land Improvements
8
0
0
00
Cash
4
8
0
0
00
Mar.
24
Building
94
0
0
0
00
Cash
0
8
0
00
Mortgage Payable
9
2
0
00
29
Equipment
35
0
0
0
00
Cash
0
0
0
00
May
10
Building
180
0
0
0
00
Cash
180
0
0
0
00
Jun.
15
Repairs Expense
6
0
0
00
Cash
6
0
0
00
Jul.
1
Truck
15
0
0
0
00
Cash
15
0
0
0
00
Oct.
15
Truck
8
0
0
00
Cash
1
8
0
0
00
Nov
30
Maintenance Expense
3
0
00
Cash
3
0
00
Dec.
30
Accumulated Depreciation, Truck
1
0
0
0
00
Cash
0
0
0
00
31
Maintenance Expense
4
0
0
00
Cash
4
0
0
00
PROBLEM 16A-2
(a)
END OF
YEAR
COST OF
EQUIPMENT
YEARLY
DEPRECIATION
EXPENSE
ACCUMULATED
DEPRECIATION
END OF YEAR
BOOK VALUE
END OF YEAR
2018
$58,000
$9,000
$9,000
$49,000
2019
2020
2021
(b)
END OF
YEAR
COST OF
EQUIPMENT
UNITS
PRODUCED
YEARLY
DEPRECIATION
EXPENSE
ACCUMULATED
DEPRECIATION
END OF YEAR
BOOK VALUE
END OF YEAR
2018
$58,000
37,000
$7,400
$7,400
$50,600
2019
14,400
2020
41,000
22,600
2021
67,000
13,400
PROBLEM 16A-2 (CONTINUED)
BEG. OF YEAR
BOOK VALUE
END OF YEAR
$29,000
22,000
22,000
22,000
BOOK VALUE
BEG. OF YEAR
$58,000
29,000
22,000
22,000
PROBLEM 16A-3
(a)
End of
Year
Cost of
Equipment
Yearly Depreciation
Expense
Acc. Dep. End of
Year
Book Value End
of Year
2018
$4,080
$640
$640
$3,440
2020
$4,080
$960
$2,560
$1,520
(b)
End of
Cost of
Acc. Dep.
Book Value
Depreciation
Acc. Dep.
End of
Book
Value End
PROBLEM 16B-1 GREEN COMPANY
GENERAL JOURNAL PAGE 4
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Feb.
5
Land
89
0
0
0
00
Cash
89
0
0
0
00
18
Land Improvements
6
0
0
00
Cash
5
6
0
0
00
Mar.
24
Building
90
0
0
0
00
Cash
27
0
0
0
00
Mortgage Payable
63
0
0
0
00
29
Equipment
37
0
0
0
00
Cash
37
0
0
0
00
May
10
Building
190
0
0
0
00
Cash
0
0
0
00
June
15
Repairs Expense
0
0
0
00
Cash
1
0
0
0
00
July
1
Truck
15
5
0
0
00
Cash
15
5
0
0
00
Oct.
15
Truck
2
0
0
00
Cash
2
2
0
0
00
30
Maintenance Expense
3
8
00
Cash
3
8
00
Accumulated Depreciation, Truck
Cash
1
4
5
PROBLEM 16B-2
(a)
END OF
YEAR
COST OF
EQUIPMENT
YEARLY DEP.
EXPENSE
ACC. DEP.
END OF YEAR
BOOK VALUE
END OF YEAR
2018
$53,000
$8,250
$8,250
$44,750
2020
$53,000
$8,250
24,750
2021
$53,000
$8,250
33,000
(b)
END OF
YEAR
COST OF
EQUIPMENT
UNITS
PRODUCED
YEARLY
DEPRECIATION
EXPENSE
ACCUMULATED
DEPRECIATION
END OF YEAR
BOOK VALUE
END OF YEAR
2018
$53,000
8,000
$4,000
$4,000
$49,000
2019
$53,000
2020
$53,000
2021
$53,000
PROBLEM 16B-2 (CONCLUDED)
BOOK VALUE
END OF YEAR
26,500
20,000
20,000
20,000
DEPRECIATION
EXPENSE
$26,500
6,500
0
0
PROBLEM 16B-3
BOOK VALUE END
OF YEAR
$5,524
4,096
2,668
ANNUAL DEPRECIATION
EXPENSE
$476
1,428
1,428
(a)
(b)
End of
Year
Cost of
Equip.
Acc. Dep.
Beg. of Year
Book Value
Beg. Of Year
Depreciation
Expense
Acc. Dep.
End of
Year
Book
Value End
of Year
$5,000
FINANCIAL REPORT PROBLEM SOLUTION—2016 Amazon’s Annual Report