CengageNOWv2 | Online teaching and learning resource from Cengage LearningCalculatorSale of EquipmentEquipment was acquired at the beginning of the year at a cost of $612,500. The equipment was depreciated using the straight-line method based on an estimated useful life of 9 years and an estimated residual value of $44,360.a. What was the depreciation for the first year? Round your answer to the nearest cent.b. Using the rounded amount from Part a in your computation, determine the gain(loss) on the sale of the equipment, assuming it was sold at the end of year eight for $102,987.Round your answer to the nearest cent and enter as a positive amount.c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank. Round your answers to the nearest cent.PreviousNext>Email InstructorSubmit Test for GradingAll work saved.

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Century 21 Accounting Multicolumn Journal

11th Edition

ISBN:9781337679503

Author:Gilbertson

Publisher:Gilbertson

Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets

Section: Chapter Questions

Problem 2AP

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Working Backward: Depreciation Polk Corp. purchased new store fixtures for $55,000 on January 31, 2014. Polk depreciates assets using the straight-line method and estimated a salvage value for the machine of $5,000. On its December 31, 2016, balance sheet, Polk reported the following: Required What is the yearly amount of depreciation expense for the store fixtures? What is the estimated useful life in years for the store fixtures? Explain your answer.
To test your formulas, assume the machine purchased had an estimated useful life of three years (20,000, 30,000, and 50,000 hours, respectively). Enter the new information in the Data Section of the worksheet. Does your depreciation total 320,000 under all three methods? There are three common errors made by students completing this worksheet. Lets clear up two of them. One, an asset that has a three-year life should have no depreciation claimed in Year 4. This can be corrected using an =IF statement in Year 4. For example, the correct formula in cell C32 is =IF(B32D9,0,(D7D8)/D9) or =IF(B32D9, 0, SLN(D7, D8, D9)). You may wish to edit what you have already entered rather than retype it. Two, as mentioned in requirement 2, the double-declining-balance calculation needs to be modified in the last year of the assets life. Assuming you have already modified the formula for Year 4 (per instructions in step 2), alter the formula for Year 3 also. If you corrected any formulas, test their correctness by trying different estimated useful lives (between 3 and 8) in cell E9. Then reset the Data Section to the original values, save the revised file as DEPREC2, and reprint the worksheet to show the correct formulas. The third common error doesnt need to be corrected in this problem. The general form of the double-declining-balance formula needs to be modified to check the net book value of the asset each year to make sure it does not go below salvage value. =DDB does this automatically, but if you are writing your own formulas, this gets very complicated and is beyond the scope of the problem.
When depreciation is recorded each period, what account is debited? a. Depreciation Expense b. Cash c. Accumulated Depreciation d. The fixed asset account involved Use the following information for Multiple-Choice Questions 7-4 through 7-6: Cox Inc. acquired a machine for on January 1, 2019. The machine has a salvage value of $20,000 and a 5-year useful life. Cox expects the machine to run for 15,000 machine hours. The machine was actually used for 4,200 hours in 2019 and 3,450 hours in 2020.
Use the information in Problem A-1 to solve this problem. Assume the delivery van is expected to have a useful life of 100,000 miles (Year 1, 40,000 miles; Year 2, 30,000 miles; Year 3, 20,000 miles; Year 4, 10,000 miles). Required Prepare a schedule of depreciation using the units-of-production method. Check Figure Year 3 depreciation, 3,200 PROBLEM A-1 A delivery van was bought for 18,000. The estimated life of the van is four years. The trade-in value at the end of four years is estimated to be 2,000.
IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, two flight simulators were purchased by a space camp for 77,000 each with a salvage value of 5,000 each and estimated useful lives of eight years. On January 1, 20-2, the hydraulic system for Simulator A was replaced for 6,000 cash and an updated computer for more advanced students was installed in Simulator B for 9,000 cash. The hydraulic system is expected to extend the life of Simulator A three years beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Simulators A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each simulator for 20-2 through 20-8.
IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, Dans Demolition purchased two jackhammers for 2,500 each with a salvage value of 100 each and estimated useful lives of four years. On January 1, 20-2, a stronger blade to improve performance was installed in Jackhammer A for 800 cash and the compressor was replaced in Jackhammer B for 200 cash. The compressor is expected to extend the life of Jackhammer B one year beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Jackhammers A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each jackhammer for 20-2 through 20-4.
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.
Choice Among Depreciation Methods Walnut Ridge Production Inc. purchased a new computerized video editing machine at a cost of $450,000. The System has a residual value of $64,000 and an expected life of 5 years. Required: 1. Compute depreciation expense, accumulated depreciation, and book value for the first 3 years of the machines life using the (a) straight-line method and (b) double-declining-balance method. 2. Which method would produce the largest income in the first, second, and third years of the assets life? 3. CONCEPTUAL CONNECTION Why might the controller of Walnut Ridge Production be interested in the effect of choosing a depreciation method? Evaluate the legitimacy of these interests.
A truck was recently purchased for 75,000 with a salvage value of 5,000 and an estimated useful life of eight years or 150,000 miles (24,000 miles per year for the first five years and 10,000 miles per year after that). Enter the new information in the Data Section of the worksheet. Again, make sure the totals for all three methods are in agreement. Print the worksheet. Save this new data as DEPREC5.
INTANGIBLE LONG-TERM ASSETS Track Town Co. had the following transactions involving intangible assets: Jan. 1 Purchased a patent for leather soles for 10,000 and estimated its useful life to be 10 years. Apr. 1 Purchased a copyright for a design for 15,000 with a life left on the copyright of 25 years. The estimated remaining (economic) life of the copyright is five years. July 1 Signed a five-year franchise agreement and opened a Starting Line high-tech running shoe store. Paid 50,000 to the franchisor. REQUIRED 1. Using the straight-line method, calculate the amortization of the patent, copyright, and franchise. 2. Prepare general journal entries to record the end-of-year amortizations.
Chapman Inc. purchased a piece of equipment in 2018. Chapman depreciated the equipment on a straight-line basis over a useful life of 10 years and used a residual value of $12,000. Chapmans depreciation expense for 2019 was $11,000. What was the original cost of the building? a. $98,000 b. $110,000 c. $122,000 d. $134,000
Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for 120,000 miles. Montello uses the units-of-production depreciation method and in year one it expects to use the truck for 23,000 miles. Calculate the annual depreciation expense.

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