Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 11, Problem 11.11BE
Change in principle; change in
• LO11–6
Refer to the situation described in BE 11–10. Assume that instead of changing the useful life and residual value, in 2018 the company switched to the double-declining-balance depreciation method. How should Robotics account for the change? What is depreciation on the building for 2018?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
P11.1
(LO 2 ) (Depreciation for Partial Period—SL, SYD, and DDB) Alladin Company purchased Machine #201 on May 1, 2020. The following information relating to Machine #201 was gathered at the end of May.
Price
$85,000
Credit terms
2/10, n/30
Freight-in
$ 800
Preparation and installation costs
$ 3,800
Labor costs during regular production operations
$10,500
It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Alladin intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,500. The invoice for Machine #201 was paid May 5, 2020. Alladin uses the calendar year as the basis for the preparation of financial statements.
Instructions
a.
Compute the depreciation expense for the years indicated using the following methods. (Round to the nearest dollar.)
1.Straight-line method for 2020.
2.Sum-of-the-years'-digits method for 2021.…
E11.11B (L0 1,2) (Depreciation—Change in Estimate) Machinery purchased for $100,000 by Deer Co. in 2016 was originallyestimated to have a life of 10 years with a salvage value of $20,000 at the end of that time. Depreciation has been entered for5 years on this basis. In 2021, it is determined that the total estimated life should be 9 years with a salvage value of $6,000 at the endof that time. Assume straight-line depreciation.Instructions(a) Prepare the entry to correct the prior years’ depreciation, if necessary.(b) Prepare the entry to record depreciation for 2021.
P9.3(a. Compute the original cost of machine ; and depreciation expense on Dec 31,2020) (b) (c)
Chapter 11 Solutions
Intermediate Accounting
Ch. 11 - Prob. 11.1QCh. 11 - Depreciation is a process of cost allocation, not...Ch. 11 - Identify and define the three characteristics of...Ch. 11 - Discuss the factors that influence the estimation...Ch. 11 - What is meant by depreciable base? How is it...Ch. 11 - Prob. 11.6QCh. 11 - Prob. 11.7QCh. 11 - Why are time-based depreciation methods used more...Ch. 11 - Prob. 11.9QCh. 11 - Prob. 11.10Q
Ch. 11 - Briefly explain the differences and similarities...Ch. 11 - Prob. 11.12QCh. 11 - Prob. 11.13QCh. 11 - What are some of the simplifying conventions a...Ch. 11 - Explain the accounting treatment required when a...Ch. 11 - Explain the accounting treatment and disclosures...Ch. 11 - Explain the steps required to correct an error in...Ch. 11 - Prob. 11.18QCh. 11 - Prob. 11.19QCh. 11 - Prob. 11.20QCh. 11 - Prob. 11.21QCh. 11 - Briefly explain the differences between U.S. GAAP...Ch. 11 - Under U.S. GAAP, litigation costs to successfully...Ch. 11 - Cost allocation At the beginning of its fiscal...Ch. 11 - Depreciation methods LO112 On January 1, 2018,...Ch. 11 - Depreciation methods; partial periods LO112 Refer...Ch. 11 - Prob. 11.4BECh. 11 - Prob. 11.5BECh. 11 - Prob. 11.6BECh. 11 - Group depreciation; disposal LO112 Mondale Winery...Ch. 11 - Prob. 11.8BECh. 11 - Prob. 11.9BECh. 11 - Prob. 11.10BECh. 11 - Change in principle; change in depreciation method...Ch. 11 - Prob. 11.12BECh. 11 - Impairment; property, plant, and equipment LO118...Ch. 11 - Prob. 11.14BECh. 11 - IFRS; impairment; property, plant, and equipment ...Ch. 11 - Prob. 11.16BECh. 11 - Prob. 11.17BECh. 11 - IFRS; impairment; goodwill LO1110 IFRS Refer to...Ch. 11 - Subsequent expenditures LO119 Demmert...Ch. 11 - Depreciation methods LO112 On January 1, 2018,...Ch. 11 - Prob. 11.2ECh. 11 - Depreciation methods; partial periods LO112 [This...Ch. 11 - Depreciation methods; asset addition; partial...Ch. 11 - Depreciation methods; solving for unknowns LO112...Ch. 11 - Depreciation methods; partial periods LO112 On...Ch. 11 - Prob. 11.7ECh. 11 - IFRS; depreciation; partial periods LO112, LO1110...Ch. 11 - IFRS; revaluation of machinery; depreciation;...Ch. 11 - Disposal of property, plant, and equipment LO112...Ch. 11 - Disposal of property, plant, and equipment;...Ch. 11 - Depreciation methods; disposal; partial periods ...Ch. 11 - Group depreciation LO112 Highsmith Rental Company...Ch. 11 - Double-declining-balance method; switch to...Ch. 11 - Prob. 11.15ECh. 11 - Prob. 11.16ECh. 11 - Cost of a natural resource; depletion and...Ch. 11 - Prob. 11.18ECh. 11 - Prob. 11.19ECh. 11 - Prob. 11.20ECh. 11 - Prob. 11.21ECh. 11 - Change in estimate; useful life and residual value...Ch. 11 - Change in principle; change in depreciation...Ch. 11 - Change in principle; change in depreciation...Ch. 11 - Prob. 11.25ECh. 11 - Impairment; property, plant, and equipment LO118...Ch. 11 - IFRS; impairment; property, plant, and equipment ...Ch. 11 - IFRS; Impairment; property, plant, and equipment ...Ch. 11 - Impairment; property, plant, and equipment LO118...Ch. 11 - Prob. 11.30ECh. 11 - IFRS; impairment; goodwill LO1110 IFRS Refer to...Ch. 11 - Prob. 11.32ECh. 11 - FASB codification research LO118 The FASB...Ch. 11 - Prob. 11.34ECh. 11 - Subsequent expenditures LO119 Belltone Company...Ch. 11 - Prob. 11.36ECh. 11 - Concept s; terminology LO111 through LO116, LO118...Ch. 11 - Retirement and replacement depreciation Appendix...Ch. 11 - Depreciation methods; change in methods LO112,...Ch. 11 - Prob. 11.2PCh. 11 - Depreciation methods; partial periods Chapters 10...Ch. 11 - Partial- year depreciation; asset addition;...Ch. 11 - Prob. 11.5PCh. 11 - Prob. 11.6PCh. 11 - Prob. 11.7PCh. 11 - Prob. 11.8PCh. 11 - Straight-line depreciation; disposal; partial...Ch. 11 - Prob. 11.10PCh. 11 - Prob. 11.11PCh. 11 - Prob. 11.12PCh. 11 - Depreciation and depletion; change in useful life;...Ch. 11 - Analysis Case 111 Depreciation, depletion, and...Ch. 11 - Communication Case 112 Depreciation LO111 At a...Ch. 11 - Judgment Case 113 Straight-line method; composite...Ch. 11 - Prob. 11.4BYPCh. 11 - Prob. 11.5BYPCh. 11 - Prob. 11.7BYPCh. 11 - Prob. 11.8BYPCh. 11 - Research Case 119 FASB codification; locate and...Ch. 11 - Ethics Case 1110 Asset impairment LO118 At the...Ch. 11 - Prob. 11.11BYPCh. 11 - Prob. 11.13BYPCh. 11 - Real World Case 1114 Disposition and depreciation;...Ch. 11 - Real World Case 1115 Depreciation and depletion...Ch. 11 - Prob. 11.16BYPCh. 11 - Target Case LO112, LO118, LO119 Target...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- P10.1 (LO 1 ) (Classification of Acquisition and Other Asset Costs) At December 31, 2019, certain accounts included in the property, plant, and equipment section of Reagan Company's balance sheet had the following balances. Land $230,000 Buildings 890,000 Leasehold improvements 660,000 Equipment 875,000 During 2020, the following transactions occurred. 1.Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000. 2.A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the…arrow_forwardProblem 7-51 (LO 7-5) Kwan acquired a warehouse for business purposes on August 30, 2002. The building cost $420,000. Kwan took $227,600 of depreciation on the building, and then sold it for $500,000 on July 1, 2021. Required: What is the adjusted basis for the warehouse? What amount of the gain or loss is realized on the sale of the warehouse? What amount of the gain or loss is unrecaptured? At what rate is the unrecaptured gain or loss taxed? What amount of the gain or loss qualifies as a § 1231 gain or loss?arrow_forward15 Assuming no additions, replacements, or extraordinary repairs, the book value of a long-lived asset declines over time. Group startsTrue or Falsearrow_forward
- Exercise 20-16 (Static) Accounting change [LO20-4] The Peridot Company purchased machinery on January 2, 2019, for $800,000. A five-year life was estimated and no residual value was anticipated. Peridot decided to use the straight-line depreciation method and recorded $160,000 in depreciation in 2019 and 2020. Early in 2021, the company revised the total estimated life of the machinery to eight years.Required:1. What type of change is this?2. Is Peridot required to revise prior years’ financial statements as a result of the change?3. Is Peridot required to provide a disclosure note to report the change?4. Determine depreciation for 2021.arrow_forwardEffect of depreciation on net income Tuttle Construction Co. specializes in building replicas of historic houses. Tim Newman, president of Tuttle Construction, is considering the purchase of various items of equipment on July 1, 2014, for 400,000. The equipment would have a useful life of five years and no residual value. In the past, all equipment has been leased. For tax purposes, Tim is considering depreciating the equipment by the straight-line method. He discussed the matter with his CPA and learned that, although the straight-line method could be elected, it was to his advantage to use the Modified Accelerated Cost Recovery System (MACRS) for tax purposes. He asked for your advice as to which method to use for tax purposes. 1. Compute depreciation for each of the years (2014, 2015, 2016, 2017, 2018, and 2019) of useful life by (a) the straight-line method and (b) MACRS. In using the straight-line method, one-half years depreciation should be computed for 2014 and 2019. Use the MACRS rates presented in Exhibit 9. 2. Assuming that income before depreciation and income tax is estimated to be 750,000 uniformly per year and that the income tax rate is 40%, compute the net income for each of the years 2014, 2015, 2016, 2017, 2018, and 2019 if (a) the straight-line method is used and (b) MACRS is used. 3. What factors would you present for Tims consideration in the selection of a depreciation method?arrow_forwardProblem 8-18Section 1231 Gains and Losses, Depreciation Recapture (LO 8.7, 8.8) William sold Section 1245 property for $28,000 in 2021. The property cost $41,000 when it was purchased 5 years ago. The depreciation claimed on the property was $20,000. If an amount is zero, enter "0". Question Content Area a. Calculate the adjusted basis of the property. b. Calculate the realized gain on the sale. c. Calculate the amount of ordinary income under Section 1245. d. Calculate the Section 1231 gain.arrow_forward
- Exercise 9.3 (Algo) Depreciation for Partial Years (LO9-3) On August 3, Cinco Construction purchased special-purpose equipment at a cost of $7,600,000. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $20,000. a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention). b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense. c. Which of these two depreciation methods (straight-line or double-declinin.arrow_forward31 When a noncurrent asset is classified as held for sale a. depreciation ceases at the date it is classified as held for sale b. depreciation continues until the asset’s actual sale c. depreciation continues until its carrying value exceeds its fair value less cost to sell d. it is almost certain that the asset will be sold in a short period of time.arrow_forward34a 34 - Which of the following statements about depreciation is false? a) The asset to be depreciated should be among the assets of the enterprise. B) Proportional depreciation method can be applied for all tangible fixed assets. NS) For a property, plant and equipment to be depreciated, its economic life must be more than one year. D) As a result of use, wear, tear, depreciation or obsolescence must be experienced in the tangible asset. TO) Depreciation is a type of expense that does not require a cash outflow.arrow_forward
- Question 36: Match each depreciation function with its best description. SLN SYD DDB Results in the same depreciation expense each period Bases depreciation on the number of years in the asset's useful life Accelerated depreciation method that doesn't consider salvage value in the initial calculationsarrow_forwardCP 8‐4 Mayr Inc. purchased a machine for its factory on June 6, 2019 for $110,000. The machine is expected to have an estimated useful life of ten years with a salvage value of $10,000. Assume the company uses the ½ year rule to calculate depreciation expense in the year of acquisition and disposal. Required: Compute the depreciation for 2019 and 2020 using 1. The straight‐line method 2. The double‐declining balance method.arrow_forwardExercise 11-4 (Algo) Other depreciation methods LO11-21 [The following information applies to the questions displaved below.) On January 1, 2021, the Allegheny Corporation purchased equipment for $343,000. The estimated service life of the equipment is 10 years and the estimated residual value is $24,000. The equipment is expected to produce 296.000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. Print Exercise 11-4 (Algo) Part 1 References 1. Sum-of-the-years'-digits (Do not round intermediate calculations. Round final answers to the nearest whole dollar amount.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Accounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Accounting (Text Only)
Accounting
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Accounting for Derivatives_1.mp4; Author: DVRamanaXIMB;https://www.youtube.com/watch?v=kZky1jIiCN0;License: Standard Youtube License
Depreciation|(Concept and Methods); Author: easyCBSE commerce lectures;https://www.youtube.com/watch?v=w4lScJke6CA;License: Standard YouTube License, CC-BY