P11-12 (continued)
1. (continued)
2010: Sold 50,000 tons
2011: Sold 120,000 tons
2012: Sold 130,000 tons
P11-12 (continued)
2. Balance sheets
December 31, 2010
Mineral ore resources $450,000
Less: Accumulated depletion (80,000 x $1.25) (100,000)
P11-13
1. Total expenses, 2010 = Units sold x (Depletion + Depreciation + Production
costs)
P11-13 (continued)
2. Cost of inventory, 12/31/2010 = 6 x (10,000 – 9,000) x $10.95
aNew depletion rate = LifeRemaining
valueResidualvalueBook −
11-44
P11-14
Note: This question requires a simple knowledge of the material in Chapter 5
and Chapter 23.
1. Change in estimate—accounted for prospectively:
2. Change in depreciation method—accounted for prospectively:
Previous depreciation amount
3. Error—accounted for as a prior period adjustment:
P11-14 (continued)
3. (continued)
Retained Earnings 800
P11-15 (AICPA adapted solution)
1. Gain on Self-Construction of Building Addition 1,500
Depreciation Expense: Buildings 317
Accumulated Depreciation: Buildings 317
Buildings 1,500
Computation of life of new building wing:
Net book value of building, 1/1/10 $60,000
÷ Annual depreciation expense ÷ 4,800 ($5,150-$350)
Remaining life of building, 1/1/10 12 ½ years
P11-15 (continued)
2. Land Improvements 5,000
Depreciation Expense: Land Improvements 250
3. Accumulated Depreciation: Machinery
and Equipment 1,100
4. Loss on Disposal of Machinery and Equipment 2,800
Accumulated Depreciation: Machinery and
Equipment 19,200
5. Land 10,000
Building 40,000
11-47
P11-15 (continued)
6. Depreciation Expense: Buildings 800
P11-16
1. Note to Instructor: This problem includes topics from Chapter 10.
Building:
Office Machinery:
Year
Book Value of Asset
at Beginning of Year
Ratea
Depreciation
Book Value at
End of yearb
2008
$20,000
20%
$4,000
$16,000
11-48
P11-16 (continued)
1. (continued)
Office Fixtures:
Year
Depreciation
Basea
Fractionb
Depreciation
Book Value at
End of yearb
2008
$25,000
5/15
$ 8,333
$21,667
2. 2011
Jan. 3 Building 30,000
Cash (or other accounts) 30,000
11-49
P11-16 (continued)
2. (continued)
*Total acquisition cost = Purchase price + Delivery costs
= $9,200 + $200 = $9,400
Aug. 10 Office Fixtures 900
Accumulated Depreciation:
Office Fixtures 467a
2011
Dec. 31 Depreciati on Expense: Building 2,061a
Depreciation Expense:
11-50
P11-16 (continued)
2. (continued)
*Since the asset has been depreciated for 3 years, 37 years remain.
bThe sale of office machinery on March 7 occurred in the first half
of the year, and therefore no depreciation is recorded on that item.
The purchase of office machinery on May 16 occurred in the first half
of the year, and therefore a full year’s depreciation is recorded.
P11-16 (continued)
2. (continued)
Dec. 31 Amortization Expense 700a
3. Accumulated Depreciation: Building
Bal.12/31/10 3,750
12/31/11 2,061
Bal.12/31/11 5,811
P11-17 (AICPA adapted solution)
1. BROCK CORPORATION
Land Account (Site Number 101)
As of September 30, 2011
Acquisition cost $600,000
P11-17 (continued)
2. BROCK CORPORATION
Capitalized Cost of Office Building
As of September 30, 2011
Contract cost $3,000,000
3. BROCK CORPORATION
Computation of Depreciation of Office Building
Using 150% Declining Balance Method
For the Year Ended December 31, 2011
Capitalized cost $3,453,500
P11-18 (AICPA adapted solution)
1. $ 65,000 Allocated in proportion to appraised values (72/900 x $812,500)
2. $747,500 Allocated in proportion to appraised values (828/900 x
$812,500)
11-53
P11-18 (continued)
12. $ 5,100 Cost less salvage ($99,000 – $5,500) times 9/55 times
one-third of a year
13. $ 28,580 Annual payment ($4,000) times present value of annuity at 10%
P11-19
1. Accumulated depreciation on the trucks, January 1, 2007
Truck
Cost
Life
Annual
Depreciation
Years
Owned
Accumulated
Depreciation
1
$12,000
5
$2,400
3
$ 7,200
P11-19 (continued)
July 1, 2007
Correct entry:
Cash 1,000
Accumulated Depreciation: Trucks
January 1, 2008
Correct entry:
Accumulated Depreciation:
Trucks ($2,560 + $2,560) 5,120
Trucks (#5) 12,000
Trucks 2,580
Gain 2,540
July 1, 2009
Correct entry:
Accumulated Depreciation: Trucks
P11-19 (continued)
1. (continued)
Entry made:
Cash 1,000
Correct depreciation:
Truck 2007 2008 2009 2010
1
$1,200
–
–
–
Effect of errors on earnings
2007 $2,600 decrease
2. Correcting journal entry
Retained Earnings ($2,600 – $496 + $7,094) 9,198
P11-20 (AICPA adapted solution)
1. BLAKE CORPORATION
Depreciation and Amortization Expense
For the Year Ended December 31, 2010
Building:
Book value 1/1/10
Machinery and equipment:
Balance, 1/1/10 $900,000
Automotive equipment:
Depreciation on $115,000
P11-20 (continued)
1. (continued)
Leasehold improvements:
Cost, 5/1/10 $168,000
BLAKE CORPORATION
Accumulated Depreciation and Amortization
December 31, 2010
Accumulated depreciation: Building at 12/31/10
Balance, 1/1/10 $263,100
Depreciation for 2010 56,214
Balance, 12/31/10 $319,314
Accumulated depreciation: Machinery and equipment
at 12/31/10
Accumulated amortization: Leasehold improvements
at 12/31/10
P11-20 (continued)
2. BLAKE CORPORATION
Gain or Loss from Disposal of Assets
For the Year Ended December 31, 2010
Gain on machine destroyed by fire:
Insurance recovery $ 15,500
3. BLAKE CORPORATION
Property, Plant, and Equipment Section
of Balance Sheet
December 31, 2010
Cost
Accumulated
Depreciation
and Amortization
Book
Value
Land
$ 150,000
$ –
$ 150,000
Explanations of Amounts:
1Machinery and equipment at 12/31/10
Balance, 1/1/10 $ 900,000
P11-21 (AICPA adapted solution)
1. PELL CORPORATION
Analysis of Changes in Plant Assets
For the Year Ended December 31, 2010
Balance
12/31/09
Increase
Decrease
Balance
12/31/10
Land
$ 350,000
$438,000 [1]
$ –
$ 788,000
Explanations of Amounts:
[1] Cost of land acquired 11/2/10
$438,000
[2] Cost of machinery and equipment purchased 1/2/10
$287,000
[3] Cost recorded for new automobile 12/31/10
Carrying amount of trade-in