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E9-5 Determine straight line depreciation for partial period
Gotham Company purchased a new machine on October 1, 2017, at a cost of $90,000. The company
estimated that the machine has a salvage value of $8,000. The machine is expected to be used for
70,000 working hours during its 8-year life.
Instructions
Compute the depreciation expense under the straight-line method for 2017 and 2018, assuming a
December 31 year-end.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .
Cost Value
Salvage value Value
Depreciable cost ?
Useful life 8 years
Annual depreciation ?
2017 Depreciation Value X 3/12 = Value
2018 Depreciation Value
After you have completed E9-5, consider the additional question.
1. Assume that the cost of the new machine changed to $85,000. Determine the impact of this change
on 2017 and 2018 depreciation.
E9-5 Solution
Cost $90,000
Salvage value 8,000
E9-5 Solution to additional question
1. Assume that the cost of the new machine changed to $85,000. Determine the impact of this change
on 2017 and 2018 depreciation.
Cost $85,000
Salvage value 8,000
E9-7 Journalize transactions related to disposals of plant assets
Thieu Co. has delivery equipment that cost $50,000 and has been depreciated $24,000.
Instructions
Record entries for the disposal under the following assumptions.
(a) It was scrapped as having no value.
(b) It was sold for $37,000.
(c ) It was sold for $20,000
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .
(a) Value
Value
Value
(b) Value
Value
Value
Value
(c ) Value
Value
Value
Value
After you have completed E9-7, consider the following additional question.
1. Assume that the accumulated depreciation up to the time of disposal changed to $30,000. Show the impact
of this change on each of the scenario given.
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
E9-7 Solution
(a) 26,000
24,000
Loss on Disposal of Plant Assets
Accumulated Depreciation -Equipment
E9-7 Solution to additional question
1. Assume that the accumulated depreciation up to the time of disposal changed to $30,000. Show the impact
of this change on each of the scenario given.
(a) 20,000
30,000
(c ) 30,000
Accumulated Depreciation - Equipment
Loss on Disposal of Plant Assets
Accumulated Depreciation -Equipment
P9-2A Journalize equipment transactions related to purchase, sales, retirements and depreciation
At December 31, 2017, Arnold Corporation reported the following plant assets.
Land $3,000,000
Buildings $26,500,000
Less: Accumulated depreciation -buildings 11,925,000 $14,575,000
Equipment 40,000,000
Less: Accumulated depreciation -equipment 5,000,000 35,000,000
Total plant assets $52,575,000
During 2018, the following selected cash transactions occurred.
Apr. 1 Purchased land for $2,200,000.
May 1 Sold equipment that cost $600,000 when purchased on January 1, 2011.
The equipment was sold for $170,000.
June 1 Sold land for $1,600,000. The land cost $1,000,000.
July 1 Purchased equipment for $1,100,000.
Dec. 31 Retired equipment that cost $700,000 when purchased on December 31,
2008. No salvage value was received.
Instructions
(a)
Journalize the transactions. (Hint: You may wish to set up T-accounts, post beginning balances,
and then post 2018 transactions.) Arnold uses straight-line depreciation for buildings and
equipment. The buildings are estimated to have a 40-year useful life and no salvage value; the
equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation
on assets disposed of at the time of sale or retirement.
(b) Record adjusting entries for depreciation for 2018.
(c) Prepare the plant assets section of Arnold's balance sheet at December 31, 2018.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .
(a) April 1 Value
Value
May 1 Value
Value
May 1 Value
Value
Value
Value
June 1 Value
Value
Value
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
July 1 Value
Value
Dec. 31 Value
Value
31 Value
Value
(b) Dec. 31 Value
Value
Dec 31 Value
Value
(c )
Plant Assets
Land Value
Buildings Value
Less: Accumulated depreciation - buildings Value ?
Equipment Value
Less: Accumulated depreciation - equipment Value ?
Total plant assets ?
6/1/17
12/31/18 Bal.
12/31/17
12/31/18 Bal.
12/31/17 05/01/18
07/01/18 12/31/18
Value
Equipment
Value
Value
Value
Value
Value
December 31, 2018
Land
Value
Value
Value
Value
Buildings
12/31/17
04/01/18
Account
Account
Account
ARNOLD CORPORATION
Partial Balance Sheet
Account
Account
Account
Account
Account
Account
Account
12/31/18 Bal.
12/31/17
12/31/18
12/31/18 Bal.
05/01/18 12/31/17
12/31/18 05/01/18
12/31/18
12/31/18
12/31/15 Bal.
After you have completed P9-2A, consider the following additional question.
1. Assume that the selling price of equipment and land changed to $168,000 and $1,300,000 respectively.
Show the impact of these changes on the journal entries.
Value
Value
Value
Value
Value
Value
Value
Accumulated Depreciation - Building
Value
Value
Value
Accumulated Depreciation - Equipment
Value
P9-2A Solution
(a) April 1 2,200,000
2,200,000
June 1 1,600,000
1,000,000
600,000
Land
Cash
Cash
Land
Gain on Disposal of Plant Assets
(b) Dec. 31 662,500
662,500
($26,500,000 x 1/40)
(c )
Plant Assets*
Land $4,200,000
Buildings 26,500,000
Less: Accumulated depreciation - buildings 12,587,500 13,912,500
6/1/17
Land
12/31/17
3,000,000
1,000,000
December 31, 2018
Depreciation Expense
Accumulated Depreciation - Building
ARNOLD CORPORATION
Partial Balance Sheet
12/31/17
12/31/18
Accumulated Depreciation - Building
11,925,000
662,500
1. Assume that the selling price of equipment and land changed to $168,000 and $1,300,000 respectively.
Show the impact of these changes on the journal entries.
(a) May 1 Accumulated Depreciation - Equipment 440,000
Cash 168,000
Equipment 600,000
