1. New tire retreading equipment, acquired at acost of $140,000 at the beginning
of a fiscal year, has an estimated useful life of four years andan estimated residual value of $10,000. The manager requestedinformation regarding the effect
of alternative methods on the amount of depreciation expenseeach year. On the
basis of the data presented to the manager, thedouble-declining-balance method
was selected.
In the first week of the fourth year, the equipment was sold for$23,300.
Instructions
1. Determine the annual depreciation expense for each of theestimated four
years of use, the accumulated depreciation at the end of eachyear, and the
book value of the equipment at the end of each year by (a) thestraight-line
method and (b) the double-declining-balance method. Thefollowing columnar
headings are suggested for each schedule:
Year DepreciationExpense Accumulated Depreciation, End ofYear Book value, End of Year
2. Illustrate the effects on the accounts and financialstatements of the sale.
3. Illustrate the effects on the accounts and financialstatements of the sale,
assuming a sale price of $15,250 instead of $23,300.
2. Data related to the acquisition of timberrights and intangible assets of Gemini
Company during the current year ended December 31 are asfollows:
a. On December 31, Gemini Company determined that $3,000,000 ofgoodwill
was impaired.
b. Governmental and legal costs of $920,000 were incurred byGemini Company
on June 30 in obtaining a patent with an estimated economic lifeof 8 years.
Amortization is to be for one-half year.
c. Timber rights on a tract of land were purchased for$1,350,000 on March 6.
The stand of timber is estimated at 15,000,000 board feet.During the current
year, 3,300,000 board feet of timber were cut and sold.
Instructions
1. Determine the amount of the amortization, depletion, orimpairment for the
current year for each of the foregoing items.
2. Illustrate the effects on the accounts and financialstatements of the adjustments for each item.
1. New tire retreading equipment, acquired at acost of $140,000 at the beginning
of a fiscal year, has an estimated useful life of four years andan estimated residual value of $10,000. The manager requestedinformation regarding the effect
of alternative methods on the amount of depreciation expenseeach year. On the
basis of the data presented to the manager, thedouble-declining-balance method
was selected.
In the first week of the fourth year, the equipment was sold for$23,300.
Instructions
1. Determine the annual depreciation expense for each of theestimated four
years of use, the accumulated depreciation at the end of eachyear, and the
book value of the equipment at the end of each year by (a) thestraight-line
method and (b) the double-declining-balance method. Thefollowing columnar
headings are suggested for each schedule:
Year DepreciationExpense Accumulated Depreciation, End ofYear Book value, End of Year
2. Illustrate the effects on the accounts and financialstatements of the sale.
3. Illustrate the effects on the accounts and financialstatements of the sale,
assuming a sale price of $15,250 instead of $23,300.
2. Data related to the acquisition of timberrights and intangible assets of Gemini
Company during the current year ended December 31 are asfollows:
a. On December 31, Gemini Company determined that $3,000,000 ofgoodwill
was impaired.
b. Governmental and legal costs of $920,000 were incurred byGemini Company
on June 30 in obtaining a patent with an estimated economic lifeof 8 years.
Amortization is to be for one-half year.
c. Timber rights on a tract of land were purchased for$1,350,000 on March 6.
The stand of timber is estimated at 15,000,000 board feet.During the current
year, 3,300,000 board feet of timber were cut and sold.
Instructions
1. Determine the amount of the amortization, depletion, orimpairment for the
current year for each of the foregoing items.
2. Illustrate the effects on the accounts and financialstatements of the adjustments for each item.
Related questions
Depreciation by Two Methods; Sale of Fixed Asset
New lithographic equipment, acquired at a cost of $800,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $90,000. The managerrequested information regarding the effect of alternative methodson the amount of depreciation expense each year. On the basis ofthe data presented to the manager, the double-declining-balancemethod was selected.
In the first week of the fifth year, the equipment was sold for$135,000.
Required:
1. Determine the annual depreciation expensefor each of the estimated five years of use, the accumulateddepreciation at the end of each year, and the book value of theequipment at the end of each year by the following methods:
a. Straight-line method
| Year | DepreciationExpense | Accumulated Depreciation,End of Year | Book Value, End ofYear |
| 1 | $ | $ | $ |
| 2 | $ | $ | $ |
| 3 | $ | $ | $ |
| 4 | $ | $ | $ |
| 5 | $ | $ | $ |
b. Double-declining-balance method
| Year | DepreciationExpense | Accumulated Depreciation,End of Year | Book Value, End ofYear |
| 1 | $ | $ | $ |
| 2 | $ | $ | $ |
| 3 | $ | $ | $ |
| 4 | $ | $ | $ |
| 5 | $ | $ | $ |
New lithographic equipment, acquired at a cost of $875,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $75,300. The managerrequested information regarding the effect of alternative methodson the amount of depreciation expense each year. On the basis ofthe data presented to the manager, the double-declining-balancemethod was selected.
In the first week of the fifth year, the equipment was sold for$128,100.
1. Determine the annual depreciation expensefor each of the estimated five years of use, the accumulateddepreciation at the end of each year, and the book value of theequipment at the end of each year by the following methods:
a. Straight-line method
Year | Depreciation Expense | Accumulated Depreciation End of Year | Book Value End of Year |
1 ________________ ______________________ _____________________________
2 ________________ ______________________ _____________________________
3 ________________ ______________________ _____________________________
4 ________________ ______________________ _____________________________
5 ________________ ______________________ ____________________________
b. Double-declining-balance method
Year | Depreciation Expense | Accumulated Depreciation End of Year | Book Value End of Year |
1 ________________ ______________________ _____________________________
2 ________________ ______________________ _____________________________
3 ________________ ______________________ _____________________________
4 ________________ ______________________ _____________________________
5 ________________ ______________________ ____________________________
2. Journalize the entry to record the sale, assumingdouble-declining balance method is used. If an amount box does notrequire an entry, leave it blank.
Cash __________ _______________
Accumulated Depreciation __________ _______________
Equipment __________ _______________
Gain On sale of equipment __________ _______________
3. Journalize the entry to record the sale, assuming that theequipment was sold for $110,000 instead of $128,100. If an amountbox does not require an entry, leave it blank.
Cash __________ _______________
Accumulated Depreciation __________ _______________
loss On sale of equipment __________ _______________
Equipment __________ _______________
