# chapter5 by xiaoyounan

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```									CHAPTER FIVE

SE5-3

(\$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
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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