*EXERCISE 9-19
(a) Declining-balance method:
(b) Units-of-activity method:
SOLUTIONS TO PROBLEMS
Item Land Building Other Accounts
1 $280,000
PROBLEM 9-1A
(a) April 1 Land ………………………………………………. 2,200,000
Cash ………………………………………… 2,200,000
1 Accumulated Depreciation—
Equipment ……………………………………. 440,000
Cash ………………………………………………. 170,000
Equipment ………………………………… 600,000
Gain on Disposal of Plant
Assets …………………………………… 10,000
June 1 Cash ………………………………………………. 1,600,000
Land …………………………………………. 1,000,000
Gain on Disposal of Plant
PROBLEM 9-2A
PROBLEM 9-2A (Continued)
Cost ………………………………….. $700,000
(b) Dec. 31 Depreciation Expense ………………………. 662,500
31 Depreciation Expense ………………………. 3,925,000
Accumulated Depreciation—
Equipment ………………………………. 3,925,000
(c) NAVARO CORPORATION
Partial Balance Sheet
December 31, 2015
Plant Assets*
Land ………………………………………………… $ 4,200,000
Buildings ………………………………………….. $26,500,000
Less: Accumulated depreciation—
PROBLEM 9-2A (Continued)
Land
12/31/14 3,000,000 6/1/14 1,000,000
Buildings
12/31/14 26,500,000
Equipment
12/31/14 40,000,000 05/01/15 600,000
Accumulated Depreciation—Buildings
12/31/14 11,925,000
Accumulated Depreciation—Equipment
05/01/15 440,000 12/31/14 5,000,000
Jan. 1 Accumulated Depreciation—Equipment …… 71,000
June 30 Depreciation Expense ……………………………… 3,000
June 30 Cash ……………………………………………………….. 12,000
Accumulated Depreciation—Equipment …… 21,000
Equipment ………………………………………… 30,000
Dec. 31 Depreciation Expense ……………………………… 3,800
31 Loss on Disposal of Plant Assets …………….. 10,600
Accumulated Depreciation—Equipment …… 22,800
Equipment ………………………………………… 33,400
Cost ………………………………………………………… $33,400
Accumulated Depreciation—Equipment
[($33,400 – $3,000) X 1/8 X 6] …………………. (22,800)
PROBLEM 9-3A
(a) Jan. 2 Patents ………………………………………………… 46,800
Cash ………………………………………………. 46,800
Jan.– Research and Development Expense ……. 230,000
June Cash ………………………………………………. 230,000
Sept. 1 Advertising Expense …………………………….. 40,000
Cash ………………………………………………. 40,000
(b) Dec. 31 Amortization Expense ………………………….. 11,700
Patents …………………………………………… 11,700
[($60,000 X 1/10) + ($46,800 X 1/9) +
($20,000 X 1/20 X 6/12)]
(c) Intangible Assets
Patents ($126,800 cost less $17,700 amortization) (1) ……… $109,100
(d) The intangible assets of Cedeno Corporation consist of two patents
and two copyrights. One patent with a cost of $60,000 is being amor-
tized over 10 years. In addition, legal costs of $46,800 incurred in the suc-
PROBLEM 9-4A
1. Research and Development Expense …………………… 160,000
Patents ………………………………………………………… 160,000
Patents ……………………………………………………………….. 8,000
Amortization Expense
[$10,000 – ($40,000 X 1/20)] ………………………… 8,000
PROBLEM 9-5A
(a) Danner London
1. $240,000 $300,000
Return on assets = 7.5% = 10.0%
$3,200,000 $3,000,000
(b) Based on the asset turnover, London Corp. is more effective in using
assets to generate sales. Its asset turnover is 11% higher than
Danner’s ratio.
PROBLEM 9-6A
(a) Accumulated
Depreciation
Year Computation 12/31
MACHINE 1
2012 $84,000* X 1/8 = $10,500 $10,500
MACHINE 2
2013 $85,000 X 40%* X 6/12 = $17,000 $17,000
*(1/5) X 2
MACHINE 3
2013 800 X $2.00a = $ 1,600 $ 1,600
(b) Year Depreciation Expense
MACHINE 2
PROBLEM 9-7A
(a) STRAIGHT-LINE DEPRECIATION
Computation End of Year
Annual
Depreciable Depreciation Depreciation Accumulated Book
Years Cost X Rate = Expense Depreciation Value
2014 $220,000* 25%** $ 55,000 $ 55,000 $195,000
DOUBLE-DECLINING-BALANCE DEPRECIATION
Computation End of Year
Book Value Annual
Beginning Depreciation Depreciation Accumulated Book
Years of Year X Rate = Expense Depreciation Value
2014 $250,000 50%* $125,000 $125,000 $125,000
2015 125,000 50% 62,500 187,500 62,500
(b) Straight-line depreciation provides the lower amount for 2014 deprecia-
tion expense ($55,000) and, therefore, the higher 2014 income. Over the
(c) Double-declining-balance depreciation provides the higher amount
*PROBLEM 9-8A
Item Land Building Other Accounts
1 $270,000
4 7,700
5 $ 21,900
PROBLEM 9-1B
(a) April 1 Land ……………………………………………….. 2,600,000
Cash …………………………………………. 2,600,000
May 1 Depreciation Expense ………………………. 25,000
Accumulated Depreciation—
Equipment …………………………………. 750,000
Gain on Disposal of Plant
Assets ……………………………………. 17,000
Cost ………………………………………. $750,000
June 1 Cash ………………………………………………. 2,000,000
Gain on Disposal of Plant
Dec. 31 Depreciation Expense ……………………… 47,000
Accumulated Depreciation—
PROBLEM 9-2B
PROBLEM 9-2B (Continued)
Cost ………………………………….. $470,000
Accum. depr.—equipment
(b) Dec. 31 Depreciation Expense ……………………… 720,000
31 Depreciation Expense ……………………… 4,706,000
Accumulated Depreciation—
(c) TONG CORPORATION
Partial Balance Sheet
December 31, 2014
Plant Assets*
Land ………………………………………………… $ 5,800,000
Buildings ………………………………………….. $28,800,000
Less: Accumulated depreciation—
buildings ……………………………….. 12,240,000 16,560,000
PROBLEM 9-2B (Continued)
Land
12/31/13 4,000,000 6/1/14 800,000
Buildings
12/31/13 28,800,000
Equipment
12/31/13 48,000,000 5/1/14 750,000
Accumulated Depreciation—Buildings
12/31/13 11,520,000
Accumulated Depreciation—Equipment
5/1/14 400,000 12/31/13 5,000,000
12/31/14 470,000 5/1/14 25,000
Jan. 1 Accumulated Depreciation—
Equipment
Mar. 31 Depreciation Expense ………………………… 1,550
Cash ………………………………………………….. 25,000
Accumulated Depreciation—
Cost …………………………………………………… $43,400
Accumulated Depreciation—Equipment
Dec. 31 Depreciation Expense ………………………… 4,500
Accumulated Depreciation—
Dec. 31 Accumulated Depreciation—
Equipment
PROBLEM 9-3B
(a) Jan. 2 Patents …………………………………………………. 45,000
Cash ………………………………………………… 45,000
Jan.- Research and Development Expense …….. 220,000
June Cash ………………………………………………… 220,000
(b) Dec. 31 Amortization Expense …………………………… 12,550
Patents …………………………………………….. 12,550
(c) Intangible Assets
Patents ($137,000 cost less $19,550 amortization) (1) ……… $117,450
Copyrights ($168,000 cost less $24,600 amortization) (2) … 143,400
(d) The intangible assets of Venable Company consist of two patents and
two copyrights. One patent with a cost of $70,000 is being amortized
PROBLEM 9-4B
1. Research and Development Expense ………………… 225,000
Patents ……………………………………………………… 225,000
PROBLEM 9-5B
(a) Quiver Swaze
1. $800,000 $920,000
Return on assets = 26.7% = 34.1%
$3,000,000 $2,700,000
(b) Based on the asset turnover, Swaze Corp. is more effective in using
assets to generate sales. Its asset turnover is 16% higher than
Quiver’s ratio.
PROBLEM 9-6B
(a) Accumulated
Depreciation
Year Computation 12/31
MACHINE 1
2012 $63,000* X 1/7 X 6/12 = $4,500 $ 4,500
MACHINE 2
2013 $64,000 X 50%* X 9/12 = $24,000 $24,000
2014 $40,000 X 50% = $20,000 44,000
Depreciation
(b) Year Expense
MACHINE 2
*PROBLEM 9-7B