Declining Balance Share Equity - Excel

							                                    Student Name:
                                            Class:
                                                     Problem 08-04

                        MONTGOMERY COMPANY
                           Machine Purchases

1. Cost of each machine:
                                       Machine
                             A           B               C           Total
Purchase price
Installation costs
Renovation costs
 Total cost


2. Depreciation at end of year 1:

       Machine          Method                   Depreciation
         A              Straight-line
         B              Units-of-production
         C              Double-declining-balance


                        MONTGOMERY COMPANY
                            General Journal

Account                                                 Debit        Credit
Depreciation expense
 Accumulated depreciation, Machine A
 Accumulated depreciation, Machine B
 Accumulated depreciation, Machine C
Given P08-04:

                           MONTGOMERY COMPANY
                              Machine Purchases

                                 Machine A Machine B Machine C
Amount paid for asset                7,600    25,600     6,800
Installation costs                     300       500       200
Renovation costs prior to use        2,000       400       600

Operating hours at end of first year              8,000

                                        Estimates
                                              Residual
           Machine                  Life        Value     Depreciation Method
             A                       5       $    1,500   Straight-line
             B                   40,000 hrs         900   Units-of-production
             C                       4            2,000   Double-declining-balance
Student Name:
        Class:
                 Problem 08-07

               REX STORES CORPORATIONS

1. Depreciation expense recorded in 2001

2. Effect of failure to record depreciation:

     Ratio              Computation            Effect on Ratio
   Earnings        Net income divided by
   per share        # of shares of stock
                         outstanding
 Fixed asset          Sales divided by
   turnover          Average net fixed
                       asset balance
   Financial       Total assets divided by
   leverage          Total stockholders
                            equity
  Return on        Net income divided by
   equity          Average stockholders'
                            equity
Given P08-05

                             REX STORES CORPORATIONS
                               Excerpt from Annual Report

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --

(e) Property and Equipment--Property and equipment is recorded at cost. Depreciation
is computed using the straight-line method. Estimated useful lives are 15 to 40 years
for buildings and improvements, and 3 to 12 years for fixtures and equipment. Leasehold
improvements are depreciated over 10 to 12 years. The components of cost at
January 31, 2001 and 2000 are as follows:

                                                2001        2000
                                                 (in thousands)
Land                                         $ 36,866 $ 30,588
Buildings and improvements                      93,582      77,645
Fixtures and equipment                          19,716      17,213
Leasehold improvements                          11,362      10,378
                                               161,526     135,824
Less: Accumulated depreciation                 (25,883)    (22,023)
                                             $ 135,643 $ 113,801
                             Student Name:
                                     Class:
                                              Problem 08-05

                          JENSEN COMPANY
                            General Journal

Account                                         Debit         Credit
Machine A - Jan. 1, 2003
(a) Depreciation expense in 2003:


(b) To record disposal:




Machine B - Dec. 31, 2003
(a) Depreciation expense in 2003:


(b) To record disposal:




Machine C - Jan. 1, 2003
(a) Depreciation expense in 2003:


(b) To record disposal:




2. Accounting rationale for journal entries recording
   machine disposal:

Machine A:


Machine B:


Machine B:
Given P08-07

                     JENSEN COMPANY

                                                     Accumulated
                     Original   Residual Estimated   Depreciation
       Asset          Cost       Value Life (years)  (straight line)
     Machine A        20,000      3,000          8 12,750 (6 years)
     Machine B        42,600      4,000         10 30,880 (8 years)
     Machine C        76,200      4,200         15 57,600 (12 years


a. Machine A:
   Date sold         January 1, 2003
   Cash received      $ 8,299
b. Machine B:
   Date sold         December 31, 2003
   Sale price        $ 7,000
   Cash received        3,000
   Amount of note       4,000
     received
   Interest rate         12%
   Term of note            12 months
c. Machine C:
   Date damaged      January 1, 2003
   Cost to salvage         -0-