Problem 8-3A (45 minutes)
Part 1
Land
Building
2
Building
3
Land
Improve-
ments 1
Land
Improvements
2
Purchase price* ……………….
$1,612,000
$598,000
$390,000
Demolition ………………………
New building……………………
$2,202,000
New improvements ………….
_________
_______
$164,000
*Allocation of purchase price
Percent
of Total
Apportioned
Cost**
Land …………………………………..
62%
$1,612,000
Part 2
2016
Jan. 1
Land …………………………………………………………….
2,115,800
Building 2 …………………………………………………….
598,000
2,202,000
390,000
164,000
5,469,800
Part 3
2016
Dec. 31
Depreciation Expense—Building 2 …………………………
26,900
Depreciation Expense—Building 3 …………………………
72,400
Depreciation Expense—Land Improv. 1 ………………….
32,500
Depreciation Expense—Land Improv. 2 ………………….
Problem 8-4A (50 minutes)
2015
Jan. 1
Equipment ……………………………………………………….
300,600
Cash ……………………………………………………………
300,600
Equipment ……………………………………………………….
Cash ………………………………………………………………
2016
Jan. 1
Equipment ……………………………………………………….
5,400
Cash ………………………………………………………………
Cash ………………………………………………………………
*2016 depreciation after January 1st extraordinary repair
Problem 8-5A (40 minutes)
2015
Jan. 1
Trucks …………………………………………………………………
22,000
Cash ………………………………………………………………
22,000
To record cost of truck ($20,515 + $1,485).
Dec. 31
Depreciation Expense—Trucks …………………………..
To record depreciation [($22,000 – $2,000)/5].
2016
Dec. 31
Depreciation Expense—Trucks …………………………..
5,200*
To record depreciation.
2017
Dec. 31
Depreciation Expense—Trucks …………………………..
5,200
Dec. 31
Cash ……………………………………………………………………
5,300
Accumulated Depreciation—Trucks ……………………..
To record sale of truck.
Problem 8-6A (20 minutes)
1.
Jan. 2
Machinery ……………………………………………………….
178,000
Cash …………………………………………………………..
178,000
To record machinery purchase.
Jan. 3
Machinery ……………………………………………………….
Cash …………………………………………………………..
Jan. 3
Machinery ……………………………………………………….
Cash …………………………………………………………..
2. a. First year
Dec. 31
Depreciation Expense—Machinery ……………………….
28,000
28,000
To record depreciation [($182,000 – $14,000)/6].
Dec. 31
Depreciation Expense—Machinery ……………………….
28,000
28,000
To record year’s depreciation.
3. Accumulated depreciation at the date of disposal
Five years’ depreciation (5 x $28,000) …………………….
$140,000
Original total cost …………………………………………………
$182,000
Accumulated depreciation …………………………………….
15,000
27,000
Accumulated Depreciation—Machinery ………………..
140,000
Machinery ……………………………………………………….
182,000
50,000
Accumulated Depreciation—Machinery ………………..
140,000
Machinery ……………………………………………………….
182,000
Gain on Sale of Machinery …………………………..
30,000
Accumulated Depreciation—Machinery ………………..
140,000
12,000
Problem 8-7A (20 minutes)
a.
July 23
Mineral Deposit ……………………………………………………
4,715,000
4,715,000
b.
July 25
Machinery ……………………………………………………….
410,000
410,000
c.
Dec. 31
Depletion Expense—Mineral Deposit ……………………
441,600
441,600
d.
Dec. 31
Depreciation Expense—Machinery ……………………….
38,400
38,400
Analysis Component
Similarities—Amortization, depletion, and depreciation are similar in that
they are all methods of allocating costs of long-term assets to the periods
that benefit from their use.
Problem 8-8A (20 minutes)
1.
2016
(a)
June 25
Leasehold ……………………………………………………….
200,000
200,000
(c)
Leasehold Improvements …………………………………….
130,000
2.
2016
(a)
Dec. 31
Rent Expense ………………………………………………………
10,000
(c)
Rent Expense ………………………………………………………
PROBLEM SET B
Problem 8-1B (50 minutes)
Part 1
Estimated
Market Value
Percent
of Total
Apportioned
Cost
Building ……………………..
$ 890,000
50%
$ 900,000
24
14
2016
Jan. 1
Buildings ……………………………………………………….
900,000
432,000
252,000
216,000
Part 2
Year 2016 straight-line depreciation on building
Part 3
Year 2016 double-declining-balance depreciation on land improvements
Part 4
Accelerated depreciation does not increase the total amount of taxes paid
over the asset’s life. Instead, it defers or postpones taxes to the later years of
Problem 8-2B (25 minutes)
Cost of machine …………………………..
$324,000
Less estimated salvage value …………………………..
Year
Straight-Linea
Units-of-Productionb
Double-Declining-
Balancec
1 ……………….
$ 58,800
$ 71,120
$129,600
3 ……………….
4 ……………….
bUnits-of-production:
Year
Units
Unit Cost
1 …………..
355,600
$0.20
2 …………..
320,400
0.20
3 …………..
317,000
4 …………..
343,600
5 …………..
138,500
0.20
cDouble-declining-balance (amounts rounded to the nearest dollar):
(100%/5) x 2 = 40% depreciation rate
Year
Beginning
Book Value
Annual
Depreciation
(40% of
Book Value)
Ending Book Value
($324,000 Cost less
Accumulated
Depreciation)
1 …………
$324,000
$129,600
$194,400
2 …………
194,400
77,760
116,640
3 …………
4 …………
5 …………
Problem 8-3B (45 minutes)
Part 1
Land
Building
B
Building
C
Land
Improve-
ments B
Land
Improve-
ments C
Purchase price* ……….
$ 868,000
$527,000
$155,000
Demolition ………………
New building……………
New improvements ….
$103,500
Allocation of
purchase price
Appraised
Value
Percent
of Total
Apportioned
Cost
Land …………………………………..
$ 795,200
56%
$ 868,000
Building B …………………………..
142,000
155,000
Part 2
2016
Jan. 1
Land ……………………………………………………………….
1,164,500
Building B……………………………………………………….
527,000
Building C……………………………………………………….
1,458,000
Land Improvements B ……………………………………..
155,000
Land Improvements C ……………………………………..
103,500
Part 3
2016
Dec. 31
Depreciation Expense—Building B …………………………..
28,500
28,500
Depreciation Expense—Building C ………………………
60,000
60,000
31,000
31,000
10,350
10,350
Problem 8-4B (50 minutes)
2015
Jan. 1
Equipment …………………………………………………………..
Cash ………………………………………………………………
To record costs of van ($25,860 + $1,810).
Jan. 3
Equipment …………………………………………………………..
1,850
Cash ………………………………………………………………
1,850
To record betterment of van.
Dec. 31
Depreciation Expense—Equipment ………………………
5,124*
Accumulated Depreciation—Equipment ………….
5,124
To record depreciation.
2016
Jan. 1
Equipment …………………………………………………………..
2,064
Cash ………………………………………………………………
2,064
To record extraordinary repair on van.
Repairs Expense—Equipment ……………………………..
Cash ………………………………………………………………
To record ordinary repair on van.
Dec. 31
Depreciation Expense—Equipment ………………………
Accumulated Depreciation—Equipment ………….
3,760
Problem 8-5B (40 minutes)
2015
Jan. 1
Machinery ……………………………………………………….
114,270
114,270
Dec. 31
Depreciation Expense—Machinery ……………………….
17,425
17,425
2016
Dec. 31
Depreciation Expense—Machinery ……………………….
27,500*
27,500
2017
Dec. 31
Depreciation Expense—Machinery ……………………….
27,500
27,500
Dec. 31
Cash ……………………………………………………………………
25,240
Accumulated Depreciation—Machinery ………………..
Problem 8-6B (20 minutes)
1.
Jan. 1
Machinery …………………………………………………………
150,000
150,000
Jan. 2
Machinery …………………………………………………………
Jan. 4
Machinery …………………………………………………………
2. a. First year
Dec. 31
Depreciation Expense—Machinery ……………………….
20,000
Dec. 31
Depreciation Expense—Machinery ……………………….
20,000
20,000
3. Accumulated depreciation at the date of disposal
First six years’ depreciation (6 x $20,000) …………………
$120,000
Book value at the date of disposal
Original total cost ……………………………………………………
$158,110
Accumulated depreciation ……………………………………….
(120,000)
28,000
10,110
Accumulated Depreciation—Machinery ………………..
120,000
158,110
52,000
Accumulated Depreciation—Machinery ………………..
120,000
158,110
13,890
25,000
13,110
Accumulated Depreciation—Machinery ………………..
120,000