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Problem 8-6B (20 minutes)
1.
Jan. 1
Machinery …………………………………………………………
150,000
Cash ……………………………………………………………
150,000
Record machinery costs.
Jan. 4
Machinery …………………………………………………………
Cash ……………………………………………………………
Record machinery costs.
Jan. 4
Machinery …………………………………………………………
Cash ……………………………………………………………
2. a. First year
Dec. 31
Depreciation Expense—Machinery ……………………….
20,000
Accumulated Depreciation—Machinery …………..
20,000
Record depreciation [($158,110-$18,110)/7 = $20,000].
Dec. 31
Depreciation Expense—Machinery ……………………….
20,000
Accumulated Depreciation—Machinery …………..
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)
Total …………………………..…………………………………………..
$ 38,110
28,000
10,110
Accumulated Depreciation—Machinery ………………..
120,000
Machinery ………………………………………………………
158,110
52,000
Accumulated Depreciation—Machinery ………………..
120,000
Machinery ………………………………………………………
158,110
Gain on Sale of Machinery …………………………..
13,890
25,000
13,110
Accumulated Depreciation—Machinery ………………..
120,000
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Problem 8-7B (20 minutes)
a.
Feb. 19
5,400,000
5,400,000
b.
Mar. 21
c.
Dec. 31
d.
Dec. 31
25,400
25,400
4,000,000 tons = $0.10 per ton.
Analysis Component
e. Depreciated over its useful life.
Explanation: If the machine will be used at another site when extraction
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 8
Problem 8-8B (20 minutes)
(a)
Jan. 1
Right–of-Use Asset ……………………………………………..
60,000
Lease Liability ……………………………………………….
60,000
Record lease asset and obligation.
(b)
20,000
Accum Amortization—Right–of-Use Asset ……..
20,000
Record annual amortization of RoU asset.
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Serial Problem — SP 8
Serial Problem — SP 8, Business Solutions (45 minutes)
1. For the three months ended March 31, 2020, depreciation expense was
$400 for office equipment and $1,250 for the computer equipment.
2.
December 31,
2019
December 31,
2020
Office Equipment ………………………………….
$ 8,000
$ 8,000
Office Equipment (book value) ……………..
$ 7,600
$ 6,000
$20,000
$20,000
Less: Accumulated Depreciation–
$13,750
Less: Accumulated Depreciation–
3.
Total asset turnover = Net sales / Average total assets
The 3-month total asset turnover at March 31, 2020:
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 8
Company Analysis — AA 8-1
All $ millions
1. The percent of original cost remaining to be depreciated is computed
by taking the ratio of the book value of Property, Plant and Equipment
2. Research and development costs are expensed as incurred.
3. Total asset turnover:
4. Unfavorable
Explanation: Apple’s turnover decreased in the current year versus the
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 8
Comparative Analysis — AA 8-2
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Apple ($ millions)
Current Year: $229,234 = 0.66 times
($375,319 + $321,686)/2
2. Apple
Explanation: Apple employs its assets more efficiently than Google for
the current year. This is evident in its higher total asset turnover.
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Global Analysis — AA 8-3
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Samsung (KRW in millions):
2. Favorable
3. a. Better
Explanation: Samsung’s asset turnover exceeds Apple’s asset turnover
of 0.66 in the current year. (Computations in AA 8-2.)
b. Better
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Ethics Challenge — BTN 8-1
1. When managers acquire new assets a number of decisions relative to
2. When assets are placed in use on a day other than the first day of the
month an assumption is often made that the assets are placed in use on
the first day of the month nearest to the date of the purchase. For
example, for assets purchased on the 1st through 15th days of the month,
3. By always assuming the first day of the following month as the date of
purchase, less depreciation is (initially) accrued for the assets
employed. This means depreciation expense will be less than if assets
Communicating in Practice — BTN 8-2
The solution to this activity will vary based on the industry and the
companies chosen for analysis. Many instructors find it useful to report
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 8
Taking It to the Net — BTN 8-3
1. Yahoo! reports Goodwill in the amount of ($ thousands) $415,809 at
2.
Goodwill (in $ thousands)
Total
Amount
$ Change
from Prior
Year
%
Change
3. Yahoo!’s intangible assets are categorized into the three categories
below at December 31, 2016. These intangibles represent 0.3%
($161,644 / $48,083,079) of total assets.
December 31, 2016 (in thousands)
Customer, affiliate, and advertiser related relationships …………….
$102,765
Developed technology and patents ……………………………………………
Tradenames, trademarks, and domain names …………………………..
Total intangible assets, net ……………………………………………………….
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 8
Teamwork in Action — BTN 8-4
1. Annual depreciation for each year of the asset’s useful life:
Year
Straight-line
Double-Declining-Balance
Units-of-Production
2020
$10,500
$5,500 (depreciate to
salvage) = $3,500
9,000* miles x $.70 = $ 6,300
* Depreciation is based on the estimated capacity of 60,000 miles. Even though the van is
driven 10,000 miles in the last year, depreciation can only be taken for the remaining 9,000
miles of estimated capacity. This will record depreciation to the estimated salvage value.
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
straight-line method reduces net income by the same amount each
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Teamwork in Action — BTN 8-4 – continued
= Cost – Accumulated depreciation
= $44,000 – (amount varies by method—see part 1 for annual amounts)
4. Book value at the end of each year
Year
Straight–line
Double-Declining-
Balance
Units of Production
2017 ……..
$33,500
$22,000
$35,600
2019 ……..
2020 ……..
For reporting purposes, each expert will have different results. But
each should show:
Plant Assets:
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 8
Entrepreneurial Decision — BTN 8-5
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
current total asset turnover of 3.2. However, we need to recognize that this
proposal depends on our confidence in both maintaining current sales,
Hitting the Road — BTN 8-6
No formal solution exists for this activity. It is usually interesting for the
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