ADMS 3585 Study Guide - Situation Two, Investment, Deferral

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grayjellyfish452

30 Sep 2014

School

York University

Department

Administrative Studies

Course

ADMS 3585

Professor

Lykke Dela Cour

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Document Summary

Exercise 11-16 (15-20 minutes) (a) ,800,000 40 = ,000 (b) *componentized asset would be capitalized separately from the building if it had a different pattern of expected benefits or a different useful life. In this example, it is assumed, in the absence of additional information that the remaining useful life of the roof is the same as the building"s remaining useful life, and that straight-line deprecation is appropriate. The most appropriate entry (and as required under ifrs), as shown is to remove the old roof and record a loss on disposal. If the original cost is not known it would have to be estimated. An alternative that exists under canadian aspe would be to debit accumulated depreciation buildings on the theory that the replacement extends the useful life of the building. The entry in this case would be as follows:

Related Questions

ABC Company purchased equipment on January 1, 2014. Availableinformation regarding this equipment and its acquisition are:

Cost: $800,000

Estimated useful life: 8 years

Estimated service hours: 40,000

Residual value: $60,000

The equipment was operated for a total of 5,000 hours in 2014and 7,000 hours in 2015. It is company policy to take a full yearâsdepreciation on all assets depreciated by time-based method in theyear of acquisition.

( 1). Calculate the depreciation expense that will be recordedat the 12/31 fiscal year end for 2014 and 2015 under followingmethods: SHOW ALL WORK! (round amounts to nearest dollar asnecessary)

(a) straight-line

(b) double-declining balance

(d) service hours (round rate to the nearest cent asnecessary)

(2). Show calculations or T account to support your answers.Calculate the following amounts linked to this asset, assumingstraight-line depreciation:

(a) depreciation base

(b) book value of the equipment to be reported on the 12/31/15balance sheet

(c) total depreciation that was taken on the equipment as of theend of its useful life, i.e. the balance in the accumulateddepreciation account at the end of the assetâs useful life

(d) book value of the equipment at the end of its usefullife

(e) the amount by which total depreciation at the end of theuseful life of the equipment would be different under thestraight-line method vs. double-declining balance method

(f) identify which of the depreciation methods listed above areaccelerated methods

(g) record the adjusting entry for depreciation at 12/31/15assuming the company uses the double declining balance method ofdepreciation.

harlequincicada685

The Diamond Glitter Company is in the process of preparing itsfinancial statements for 2012. Assume that no entries fordepreciation have been recorded in 2012. The following informationrelated to depreciation of fixed assets is provided to you.

1. The company purchased equipment on January 2, 2009, for$165000. At that time, the equipment had an estimated useful lifeof 7 years with a $25000 salvage value. The equipment isdepreciated on a straight-line basis. On January 2, 2012, as aresult of additional information, the company determined that theequipment has a remaining useful life of 3 years with a $15000salvage value.

2. During 2012, the company changed from thedouble-declining-balance method for its building to thestraight-line method. The building originally cost $625000. It hada useful life of 10 years and a salvage value of $50000. Thefollowing computations present depreciation on both bases for 2010and 2011.
		2011	2010
	Straight-line	$ 57,500	$ 57,500
	Declining-balance	$ 92,000	$ 115,000

3. The company purchased a machine on July 1, 2010, at a cost of$450000. The machine has a salvage value of $25000 and a usefullife of 10 years. The company's bookkeeper recorded straight-linedepreciation in 2010 and 2011 but failed to consider the salvagevalue. Ignore Tax effect.

4. The company has failed to accrue sales commissions payable atthe end of each of the last 2 years, as follows.
	December 31, 2011	$ 5,400
	December 31, 2012	$ 4,600

5. In reviewing the December 31, 2011, inventory, the companydiscovered errors in its inventory-taking procedures that havecaused inventories for the last 3 years to be incorrect, asfollows. The company has already made an entry that established theincorrect December 31, 2012, inventory amount.
	December 31, 2010	Understated	$ 32,000
	December 31, 2011	Understated	$ 51,000
	December 31, 2012	Overstated	$ 9,500

6. At December 31, 2012, the company decided to change to thestraight-line depreciation method on its retail display equipmentfrom double-declining-balance. The equipment had an original costof $250000 when purchased on January 1, 2011. It has a salvagevalue of 0 and a 8-year useful life. Depreciation expense recordedprior to 2012 under the double-declining-balance method was $62500.The company has already recorded 2012 depreciation expense of$46875 using the double-declining-balance method.

7. Before the current year, the company accounted for its incomefrom long-term construction contracts on the completed-contractbasis. Early this year, the company changed to thepercentage-of-completion basis for accounting purposes, butcontinues to use the completed-contract method for tax purposes.Income for the current year has been recorded using the new method.Prior year tax effects must be considered. The followinginformation is available.
		Pretax Income
		Percentage-of-Completion	Completed-Contract
	Prior to 2012	$320,000	$180,000
	2012	$140,000	$120,000

Required:
Prepare the journal entries necessary at December 31, 2012 torecord the corrections and changes made to date related to theinformation provided. The books are still open for 2012. The incometax rate is 35%. The company has not yet recorded its 2012 incometax expense and payable amounts so current-year tax effects may beignored.