Problem 8-7B (20 minutes)
a.
Feb. 19
Mineral Deposit ……………………………………………………
5,400,000
Cash ……………………………………………………….
5,400,000
To record purchase of mineral deposit.
b.
Mar. 21
Machinery ……………………………………………………….
Cash ……………………………………………………….
To record costs of machinery.
c.
254,000 tons x $1.35 = $342,900].
d.
4,000,000 tons = $0.10 per ton.
254,000 tons x $0.10 = $25,400].
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 8-8B (20 minutes)
1.
2016
(a)
Jan. 1
Leasehold ……………………………………………………….
40,000
(b)
Jan. 1
Prepaid Rent……………………………………………………….
36,000
(c)
Jan. 3
Leasehold Improvements …………………………………….
20,000
2.
2016
(a)
Dec. 31
Rent Expense ………………………………………………………
8,000
(b)
Dec. 31
Amortization Expense—Leasehold Improvements ………
4,000
(c)
Dec. 31
Rent Expense ………………………………………………………
36,000
Serial Problem — SP 8
Serial Problem — SP 8, Business Solutions (45 minutes)
1. For the three months ended March 31, 2017, depreciation expense was
2.
December 31,
2016
December 31,
2017
Office Equipment ………………………………….
$ 8,000
$ 8,000
Office Equipment (book value) ……………..
$ 7,600
$ 6,000
December 31,
2016
December 31,
2017
$20,000
$20,000
$13,750
3.
Total asset turnover = Net sales / Average total assets
The 3-month total asset turnover at March 31, 2017:
Reporting in Action — BTN 8-1
1. The percent of original cost remaining to be depreciated is computed
by taking the ratio of the book value of property and equipment to the
2. In Apple’s “Summary of Significant Accounting Policies” (Note 1:
Property, Plant and Equipment) it discloses estimated useful lives by
3. The change in total property and equipment before accumulated
depreciation for the year ended September 27, 2014, is an increase of
4. Total asset turnover for year ended ($ millions):
5. Solution depends on the financial statement data obtained.
Comparative Analysis — BTN 8-2
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Apple ($ millions)
$182,795 = 0.83 times
Current Year: (231,839 + $207,000)/2
2. Each dollar of Apple’s assets produces $0.83 and $0.89 in net sales for
the current and prior year, respectively. Each dollar of Google’s assets
Ethics Challenge — BTN 8-3
1. When managers acquire new assets a number of decisions relative to
2. When assets are placed in use on a day other than the first day of the
month an assumption is often made that the assets are placed in use on
the first day of the month nearest to the date of the purchase. For
3. By always assuming the first day of the following month as the date of
Communicating in Practice — BTN 8-4
The solution to this activity will vary based on the industry and the
companies chosen for analysis. Many instructors find it useful to report
the results from the teams to the class for purposes of classroom
discussion and analysis.
Taking It to the Net — BTN 8-5
1. Yahoo! has Goodwill in the amount of ($ thousands) $5,163,654, at
December 31, 2014.
2.
Goodwill ($ thousands)
Total
Amount
$ Change
from Prior
Year
%
Change
Balance, December 31, 2013 ………………..
$4,679,648
Balance, December 31, 2014 ………………..
3. Yahoo!’s intangible assets are categorized into the three categories
below at December 31, 2014. These intangibles represent 0.8%
($470,842 / $61,960,344) of total assets.
December 31, 2014 ($ thousands)
Customer, affiliate and advertiser related relationships ……………..
$ 281,596
Trade names, trademarks, and domain names …………………………..
4. Note 6 indicates that Trade names, trademarks, and domain names
have original estimated useful lives of “one year to an indefinite life.” If
Teamwork in Action — BTN 8-6
1. Annual depreciation for each year of the asset’s useful life:
Year
Straight-line
Double-Declining-Balance
Units-of-Production
2014
($44,000-$2,000)/4
= $10,500
$22,000 x 50%= $11,000
18,000 miles x $.70 = $12,600
$11,000 x 50% = $5,500
21,000 miles x $.70 = $14,700
(100%/4) x 2 = 50% is
declining-balance rate.
($44,000-$2,000)/60,000 miles
= $.70 per mile.
2. Depreciation is recorded in an adjusting entry at the end of each
period. The entry is:
3. Each expert’s presentation of the comparison of methods will be
slightly different. The experts should make the following points: The
Teamwork in Action — BTN 8-6 – continued
= Cost – Accumulated depreciation
4. Book value at the end of each year
Year
Straight–line
Double-Declining-
Balance
Units of Production
2014 ……..
$33,500
$22,000
$35,600
2016 ……..
2017 ……..
For reporting purposes, each expert will have different results. But
each should show:
Plant Assets:
Entrepreneurial Decision — BTN 8-7
Part 1
(a) Under current conditions, the total asset turnover is 3.2. This is
(b) Under this proposal, its asset turnover would increase to 4. This is
Part 2
The proposal would yield an improved total asset turnover of 4 vis-à-vis the
Hitting the Road — BTN 8-8
Global Decision — BTN 8-9
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Samsung (KRW in millions):
2. Samsung was more efficient in using its assets to generate net sales
than Google and Apple. Specifically, in the current year, each KRW