additional final practice problems.pdf

Financial Accounting (COMM 293) Term: 2022S1, Instructor: Xin Zheng COMM 293 Final Practice Problems Chapter 9 – Plant Assets, Natural Resources, and Intangible Assets Question 1: Yello Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2022, at a cost of $148,000. Over its 4-year useful life, the bus is expected to be driven 100,000 miles. Salvage value is expected to be $8,000. a) Compute the depreciable cost per unit. b) Prepare a depreciation schedule assuming actual mileage was: 2022, 26,000; 2023, 32,000; 2024, 25,000; and 2025, 17,000. Question 2: Rottino Company purchased a new machine on October 1, 2022, at a cost of $150,000. The company estimated that the machine will have a salvage value of $12,000. The machine is expected to be used for 10,000 working hours during its 5-year life. Compute the depreciation expense under the following methods for the year indicated: a) Straight-line for 2022. b) Units-of-activity for 2022, assuming machine usage was 1,700 hours.

Financial Accounting (COMM 293) Term: 2022S1, Instructor: Xin Zheng c) Declining-balance using double the straight-line rate for 2022 and 2023. Question 3: Linton Company purchased a delivery truck for $34,000 on January 1, 2022. The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2022 and 12,000 in 2023. a) Compute depreciation expense for 2022 and 2023 using (1) the straight-line method, (2) the units- of-activity method, and (3) the double-declining-balance method, b) Assume that Linton uses the straight-line method. Prepare the Journal entry to record 2022 depreciation expense. Show how the truck would be reported in the December 31, 2022, balance sheet.

Financial Accounting (COMM 293) Term: 2022S1, Instructor: Xin Zheng Question 4: Victor Mineli, the new controller of Santorini Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2022. Here are his findings: Type of Asset Date acquired Cost Accumulated Depreciation, Jan. 1, 2022 Useful Life (years) Salvage Value Old Proposed Old Proposed Building Jan. 1, 2014 $700,000 $130,000 40 58 $50,000 $35,000 Warehouse Jan. 1, 2017 120,000 23,0000 25 20 5,000 3,600 All assets are depreciated by the straight-line method. Santorini Company uses a calendar year in preparing annual adjusting entries and financial statements. After discussion, management has agreed to accept Victor’s proposed changes. (The “Proposed” useful life is total life, not remaining life.) a) Compute the revised annual depreciation on each asset in 2022. b) Prepare the entry (or entries) to record depreciation on the building in 2022.

Financial Accounting (COMM 293) Term: 2022S1, Instructor: Xin Zheng Question 5: Here are selected 2022 transactions of Akron Corporation. Jan. 1: Retired a piece of machinery that was purchased on January 1, 2012. The machine cost $62,000 and had a useful life of 10 years with no salvage value. Jun. 30: Sold a computer that was purchased on January 1, 2020. The computer cost $36,000 and had a useful life of 3 years with no salvage value. The computer was sold for $5,000 cash. Dec. 31: Sold a delivery truck for $9,000 cash. The truck cost $25,000 when it was purchased on January 1, 2019, and was depreciated based on a 5-year useful life with a $4,000 salvage value. a) Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Akron Corporation uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2021). Question 6: Pryce Company owns equipment that cost $65,000 when purchased on January 1, 2019. It has been depreciated using the straight-line method based on an estimated salvage value of $5,000 and an estimated useful life of 5 years. Prepare Pryce Company's journal entries to record the sale of the equipment in these four independent situations:

Financial Accounting (COMM 293) Term: 2022S1, Instructor: Xin Zheng a) Sold for $31,000 on January 1, 2022. b) Sold for $31,000 on May 1, 2022. c) Sold for $11,000 on January 1, 2022. d) Sold for $11,000 on October 1, 2022.

Financial Accounting (COMM 293) Term: 2022S1, Instructor: Xin Zheng Question 7: In recent years, Jayme Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. For the declining-balance method, Jayme Company uses the double-declining rate. For the units-of- activity method, total machine hours are expected to be 30,000. Actual hours of use in the first 3 years were 2021, 800; 2022, 4,500; and 2023, 6,000. a) Compute the amount of accumulated depreciation on each machine at December 31, 2023. b) If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2021? In 2022?

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