1. 4.
1. 5.
Chapter 9, SE 3.
c
Free
Cash Flow =Net Cash Flows from
Operating Activities –
Sales of
Plant Assets
Chapter 9, SE 2.
Purchases of
Plant Assets
Dividends
–+
bb
LONG-TERM ASSETS
Chapter 9, SE 1.
b
CHAPTER 9—Solutions
431
Appraisal
$ 400,000
Appraisal
$ 600,000
* $1,700,000 =
Land × 33.3% $ 566,100
Land 33.3% $ 566,100
Asset Percentage Apportionment*
Chapter 9, SE 5.
Land
25.0% $ 375,000
Asset
Chapter 9, SE 4.
Apportionment*Percentage
(–) ÷4
Year 1: × =
Year 1: $2,250
$8,250
8,000
) × =(–
Chapter 9, SE 6.
$8,250 $750 $1,875
Depreciation for each year:
years =
$8,250.00
Depreciation for
50%
Chapter 9, SE 8.
$750
Depreciation for
2,400
$4,125.00
Chapter 9, SE 7.
*Rounded
*
50% × =
2. a.
=
=–
=
Asset discarded as having no value
Cash Received – Carrying Value
$0
($7,200)
$7,200
$11,200
Chapter 9, SE 9.
Chapter 9, SE 10.
Year 1:
$5,600
Gain (Loss) on Disposal of Equipment
*
434
1. =
=–
=
2. a.
–) ÷ =
Carrying Value
$24,300
$10,800
Equipment – Accumulated Depreciation
$13,500
Asset discarded as having no value
Chapter 9, SE 11.
$2.55( $24,000,000 $3,600,000 8,000,000
Depletion charge per ton:
Chapter 9, SE 12.
per tontons
435
–) ÷ =
Chapter 9, SE 14.
per ton
$2,400,000
Depletion charge per ton:
(
Chapter 9, SE 13.
tons $3.40$16,000,000 4,000,000
working program was developed should be capitalized and amortized over the soft-
The research and development costs are expensed as incurred. The costs after the
ware’s useful life. After one year, the software would appear on the balance sheet
as follows:
Chapter 9, SE 15.
The research and development costs are expensed as incurred. The costs after the
working program was developed should be capitalized and amortized over the soft-
436
1.
1.
2.
If cash received for the asset equals its carrying value, then no gain or loss
occurs.
Annual depletion refers to units extracted, but depletion expense includes only
After that, it would be a coincidence if the carrying value equaled the market
value.
Chapter 9, E 2.
logical change. Companies use it to minimize the risk of obsolescence.
Chapter 9, E 1.
On the date of acquisition, the carrying value equals the current market value.
437
1. 5.
Present
Value
1.000 × ($24,000)
$ 640
=
$24,000
Acquisition cost
1.000Present value factor
Chapter 9, E 4.
Net present value
ca
Chapter 9, E 3.
Management should purchase the new machine because it will earn a return on
438
1.
$300,000
24,000
$ 40,000
Paving parking lots
Cost of land improvements:
Broker’s fees
Cost of land:
Purchase price
Chapter 9, E 7.
RE, OR
=–
Chapter 9, E 6.
Chapter 9, E 5.
Dividends
–+
Free
Cash Flow
Purchases of
Plant Assets
Sales of
Plant Assets
Net Cash Flows from
Operating Activities
439
Apportionment*
$ 48,000
$70,000
4,400
Purchase price
New tires
Chapter 9, E 9.
Cost and depreciable cost of tractor:
Chapter 9, E 8.
20%
$ 60,000
Appraisal
Land
Percentage
Asset
440
$45,000
7,500
$37,500
1.
÷5 =
10,800
×=
Accumulated Depreciation—Drilling Truck
To record depreciation for 2012 using the double-
declining-balance method
10,800
Depreciation Expense—Drilling Truck
$7,500
$37,500
Cost
Less estimated residual value
Depreciable cost
Depreciation computed by straight-line method:
$1,120 $560
Chapter 9, E 10.
Balance sheet presentation:
Year 1:
50%
Chapter 9, E 11.
Adjusting entry:
*
441
÷10=
÷10=
Chapter 9, E 12.
$ 56,000
First-year depreciation:
Second-year depreciation:
$560,000
$560,000
Accumulated depreciation:
56,000
$112,000
442
1.
= Cash Received – Carrying Value
=–
=
Chapter 9, E 13.
$0
Asset discarded as having no value
Gain (Loss) on Disposal of Equipment
$7,200
($7,200)
2014
July 1
×6/12=
1. 2014
July 1
2. 2014
July 1
3. 2014
July 1
$225
Chapter 9, E 15.
Depletion charge per ton:
1,575
Accumulated Depreciation—Computer
Cash
225
Depreciation Expense—Computer
Chapter 9, E 14.
Accumulated Depreciation—Computer
1,575
Loss on Disposal of Computer
925
400
1,100
Cash
444
1.
2.
1,030,000
$320,000
Cost of copyright
Cost of trademark
1,030,000
Patent
450,000
Cash
Note that the copyright is limited by the period over which it will produce revenue,
Chapter 9, E 17.
Chapter 9, E 16.
$ 40,000
(a) Patent
To record purchase of patent
(b)
No annual amortization but subject to annual impairment test.
1.
7.i
2. User Insight: Effects on earnings and cash flows identified
Chapter 9, P 1.
c
1. Long-term assets identified
The items that would be seen on an income statement are (g) depreciation,
446
Land
Land Improvements Buildings Machinery Expense
Land $160,300
Surveying costs 2,050
Transfer of title
preparation $ 17,550
Architect’s fee $ 6,720 26,880
Building
construction 357,500
Sidewalks 5,700
Parking lots 27,200
Damage to
building $4,450
Injured employee 1,280
Water damage 3,410
Sale of timber ( 3,500)
Lake Compan
y
December 31, 2011
Chapter 9, P 2.
Schedule of Proper Charges to Asset and Expense Accounts
1. Schedule prepared
Chapter 9, P 2. (Continued)
2. User Insight: Impact of classifications discussed
The classification of the preceding items among several accounts will affect profit-