CHAPTER 9
SOLUTIONS TO PROBLEMS—SET C
Item Land Building Other Accounts
1 $270,000
2 6,000
3 32,000
4 6,700
(a) April 1 Land ……………………………………………….. 2,600,000
Cash …………………………………………. 2,600,000
May 1 Depreciation Expense ………………………. 25,000
Accumulated Depreciation—
PROBLEM 9-2C
PROBLEM 9-1C
Cost ……………………………………….. $750,000
Accum. depr.—Equipment ………. (400,000)
June 1 Cash ………………………………………………… 1,800,000
Gain on Disposal of Plant
Assets …………………………………….. 1,000,000
Land ………………………………………….. 800,000
PROBLEM 9-2C (Continued)
Cost …………………………..……… $470,000
Accum. depr.—Equipment
(b) Dec. 31 Depreciation Expense ………………………. 720,000
Accumulated Depreciation—
Buildings ($28,800,000 X 1/40) …. 720,000
(c) CRAIG CORPORATION
Partial Balance Sheet
December 31, 2014
Plant Assets*
Land ………………………………………………… $ 5,800,000
Buildings …………………………………………. $28,800,000
Less: Accumulated depreciation—
PROBLEM 9-2C (Continued)
Land
12/31/13 4,000,000 6/1/14 800,000
4/1/14 2,600,000
12/31/14 Bal. 5,800,000
Equipment
12/31/13 48,000,000 5/1/14 750,000
9/1/14 840,000 12/31/14 470,000
12/31/14 Bal. 47,620,000
Jan. 1 Accumulated Depreciation—
Equipment
($47,000 X 1/10 X 10 years) ……………. 47,000
Equipment ………………………………… 47,000
Cost …………………………..…………………… $43,400
Accumulated Depreciation—
Computer
[($43,400 X 1/7) X 3 + $1,550] ………… (20,150)
Book Value……………………………………… 23,250
PROBLEM 9-3C
(a) Jan. 2 Patents ………………………………………………….. 36,000
Cash ………………………………………………… 36,000
Jan.- Research and Development Expense ……… 220,000
June Cash ………………………………………………… 220,000
(b) Dec. 31 Amortization Expense ……………………………. 10,450
Patents …………………………………………….. 10,450
[($60,000 X 1/10) + ($36,000 X 1/9) +
(c) Intangible Assets
Patents ($114,000 cost less $16,450 amortization) (1) ………. $ 97,550
Copyrights ($156,000 cost less $18,600 amortization) (2) …. 137,400
(d) The intangible assets of Vincent Company consist of two patents and
two copyrights. One patent with a cost of $60,000 is being amortized
over 10 years; an additional $36,000 incurred in successfully defending
PROBLEM 9-4C
1. Research and Development Expense …………………… 150,000
Patents ……………………………………………………….. 150,000
PROBLEM 9-5C
(a) Culver Kiltie
1.
$780,000 $900,000
Return on assets = 26% = 33%
$3,000,000 $2,700,000
(b) Based on the asset turnover, Kiltie Corp. is more effective in using
assets to generate sales. Its asset turnover is 16% higher than
Culver’s ratio.
PROBLEM 9-6C
(a) Accumulated
Depreciation
Year Computation 12/31
BUS 1
BUS 2
2013 $135,000 X 50%c = $67,500 $ 67,500
BUS 3
2013 29,000 miles X $.60d = $17,400 $17,400
(b) Depreciation
Year Expense
BUS 2
(1) 2013 $135,000 X 50% X 10/12 = $56,250
*PROBLEM 9-7C
(a) STRAIGHT-LINE DEPRECIATION
Computation End of Year
Annual
Depreciable Depreciation Depreciation Accumulated Book
Years Cost X Rate = Expense Depreciation Value
2014 $330,000a 20%b $66,000 $ 66,000 $284,000
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 $350,000 40%c $140,000 $140,000 $210,000
2015 210,000 40% 84,000 224,000 126,000
(b) Straight-line depreciation provides the lower amount for 2014 depreci-
ation expense and, therefore, the higher 2014 income. Over the five–
*PROBLEM 9-8C