chapter5 by xiaoyounan

VIEWS: 10 PAGES: 6

									CHAPTER FIVE

SE5-3

Tylo Corporation: Market Basket purchase

                  ($230,000/$250,000 = .92)
Land            $ 80,000 × 0.92 =       $ 73,600
Building         145,000 × 0.92 =        133,400
Truck             25,000 × 0.92 =         23,000
                $250,000                $230,000


SE5-9

Classify accounting treatment as (1) expense, (2) capitalize, or (3) neither.

a.     1

b.     3

c.     2

d.     2

e.     2

f.     2

g.     1

SE5-13

Coppery Mining: Depletion

                     $3,000,000/6,000,000 = $0.50
     Year    Tons Produced        Dep. for Yr.
      1         850,000         850,000 × $0.50 $425,000



                                                                     Page 1 of 6
E5-3

Norris Company: Depreciation expense and book value

a.   Straight-line depreciation = (cost – residual value)/useful life
     (($42,000 + $1,200) – $3,200)/10 = $4,000 per year:

                  Depreciation        Accumulated          Book Value
       Year         Expense           Depreciation         at Year-end
       2000          $4,000              $4,000             $39,200
       2001           4,000               8,000               35,200
       2002           4,000              12,000               31,200

b.   Double-declining balance depreciation:

              Beginning                                                   Ending
                Book            Depreciation           Accumulated         Book
      Year      Value             Expense              Depreciation        Value
      2000     $43,200     $43,200 × 2/10 = $8,640        $8,640          $34,560
      2001      34,560      34,560 × 2/10 = 6,912         15,552           27,648
      2002      27,648      27,648 × 2/10 = 5,530         21,082           22,118

c.   Straight-line = $31,200
     Double-declining balance = $22,118

E5-6

Troy Wilson Athletic Gear: Sale of asset

Straight-line
($18,000 – $2,000)/8 = $2,000 per year

                 Beginning            Depreciation            Ending
     Year        Book Value             Expense             Book Value
      1           $18,000                $2,000              $16,000
      2            16,000                 2,000               14,000
      3            14,000                 2,000               12,000
      4            12,000                 2,000               10,000

                                                                        Page 2 of 6
E5-6          CONTINUED

a.   If they sold it for $11,400, they would realize:
     $11,400 – $10,000 = $1,400—a gain.

b.   If they sold it for $7,800, they would realize:
     $7,800 – $10,000 = ($2,200)—a loss.


P5-8A

Harvey’s Hoola Hoop Company: Changing estimates of residual value and
useful life

a.                                          1998
     Original cost               $37,000
     Estimated residual value     (2,000)
     Depreciable amount          $35,000 /5 years        7,000 1998 Annual
                                                                   depreciation
                                                                   expense
                                                         7,000 1999 Annual
                                                                   depreciation
                                                                   expense
     Original cost               $37,000                14,000 1999 Accumulated
                                                                   depreciation
     Accumulated depreciation (14,000)
     after 1999
     Book value after 1999    $23,000
     New estimated residual      (500)
           value
     Remaining depreciable    $22,500 /3 years =         7,500 2000 Annual
           amount                                                   depreciation
                                                        21,500 2000 Accumulated
                                                                    depreciation
                                                         7,500 2001          Annual
                                                                    depreciation
     Original cost                37,000                 7,500 2002          Annual
                                                                    depreciation
     Accum. depr. after 2002     (36,500)               36,500 2002 Accumulated
                                                                    depreciation
     Book value after 2002           500


                                                                      Page 3 of 6
P5-8A         CONTINUED

b.                                         1998
     Original cost               37,000
     Estimated residual value    (2,000)
     Depreciable amount          35,000 /5 years    7,000 1998 Annual
                                                               depreciation
                                                    7,000 1999          Annual
                                                               depreciation
     Original cost               37,000            14,000 1999 Accumulated
                                                               depreciation
     Accum. depr. after 1999    (14,000)
     Book value after 1999       23,000
     Estimated residual val.     (2,000)
     Remaining depreciable       21,000 /2 years   10,500 2000 Annual
          amt.                                                depreciation
                                                   24,500 2000 Accumulated
                                                              depreciation
     Original cost               37,000            10,500 2001 Annual
                                                              depreciation
     Accum. depr. after 2001    (35,000)           35,000 2001 Accumulated
                                                              depreciation
     Book value after 2001        2,000




                                                                 Page 4 of 6
P5-8A            CONTINUED

c.                                         1998
     Original cost               37,000
     Estimated residual value    (2,000)
     Depreciable amount          35,000 /5 years    7,000 1998 Annual
                                                              depreciation
                                                    7,000 1999 Annual
                                                              depreciation
     Original cost               37,000            14,000 1999 Accumulated
                                                              depreciation
     Accum. depr. after 1999    (14,000)
     Book value after 1999       23,000
     Estimated residual val.     (1,000)
     Remaining depreciable       22,000 /4 years    5,500 2000 Annual
          amt.                                                 depreciation
                                                   19,500 2000 Accumulated
                                                               depreciation
                                                    5,500 2001 Annual
                                                               depreciation
                                                    5,500 2002 Annual
                                                               depreciation
     Original cost               37,000             5,500 2003          Annual
                                                               depreciation
     Accum. depr. after 2003    (36,000)           36,000 2003 Accumulated
                                                               depreciation
     Book value after 2003        1,000




                                                                 Page 5 of 6
P5-8A            CONTINUED



d.                                         1998
     Original cost               37,000
     Estimated residual value    (2,000)
     Depreciable amount          35,000 /5 years    7,000 1998 Annual
                                                              depreciation
                                                    7,000 1999 Annual
                                                              depreciation
     Original cost               37,000            14,000 1999 Accumulated
                                                              depreciation
     Accum. depr. after 1999    (14,000)
     Book value after 1999       23,000
     Addition in 2000             4,000
     Estimated residual val.         (0)
     Remaining depreciable       27,000 /5 years    5,400 2000 Annual
          amt.                                                depreciation
                                                              expense
                                                   19,400 2000 Accumulated
                                                              depreciation
                                                    5,400 2001 Annual
                                                              depreciation
                                                    5,400 2002 Annual
                                                              depreciation
     Original cost              37,000              5,400 2003 Annual
                                                              depreciation
     Addition in 2000             4,000             5,400 2004 Annual
                                                              depreciation
     Accum. depr. after 2004    (41,000)           41,000 2004 Accumulated
                                                              depreciation
     Book value after 2004            0




                                                                Page 6 of 6

								
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