Concept explainers
• LO11–2
Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $80,000. The residual value of the lathe was estimated to be $5,000 at the end of a five-year life. The lathe was sold on March 31, 2018, for $17,000. Howarth uses the
Required:
1. Prepare a schedule to calculate the gain or loss on the sale.
2. Prepare the
3. Assuming that Howarth had instead used the sum-of-the-years’-digits depreciation method, prepare the journal entry to record the sale.
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INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
- UWorld ROGER mos6 as BARRAD Multiple Choice O O X Company had been depreciating a machine with an original cost of $125,000 and a salvage value of $15,000 over its estimated useful life of 10 years using straight line depreciation. At the beginning of the seventh year, X Company determined that the machine will actually remain in use for a total of 12 years and will have a salvage value of $5,000 How much depreciation will X Company recognize in the seventh year? O $9,167 $7,333 $9,000 CPA Review O $10,000 Soved Help Save & Exitarrow_forwardRequired information Exercise 11-1 (Algo) Depreciation methods [LO11-2] [The following information applies to the questions displayed below.] On January 1, 2024, the Excel Delivery Company purchased a delivery van for $35,850. At the end of its five-year service life, it is estimated that the van will be worth $3,000. During the five-year period, the company expects to drive the van 109,500 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. Exercise 11-1 (Algo) Part 3 3. Units of production using miles driven as a measure of output, and the following actual mileage: Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount. Depreciation Year Miles 2024 23,900 $ 2025 25,900 2026 16,900 2027 29,500 7,170 7,770 5,070 8,850 2028 15,300 Total $ 28,860arrow_forwardQ-5 Cactus Inc. purchased a machine on January 1, 2022, at a cost of $60,000. The machine is expected to have an estimated residual value of $5,000 at the end of its five-year useful life. The company capitalized the machine and depreciated it in 2022 using the double-declining-balance method of depreciation. The company has a policy of using the straight-line method to depreciate equipment, as this method best reflects the benefits to the company over the life of its machinery. However, the company accountant neglected to follow company policy when he used the double-declining-balance method. Net income for the year ended December 31, 2022, was $53,000 as a result of depreciating the machine incorrectly. Cactus has not closed its books for 2022 yet. Cactus uses IFRS to prepare its financial statements. Required Using the method of depreciation that the company normally follows, prepare the correcting entry and determine the corrected net income. Assume the books of account have not…arrow_forward
- Brief Exercise 11-15 (Algo) Change in principle; change in depreciation method [LO11-6] At the beginning of 2022, Robotics Incorporated acquired a manufacturing facility for $131 million $10.1 million of the purchase price was allocated to the building. Depreciation for 2022 and 2023 was calculated using the straight-line method, a 20-year useful life, and a $2.1 million residual value. In 2024, the company switched to the double-declining-balance depreciation method What is depreciation on the building for 2024? Note: Do not round intermediate calculations. Enter your answer in whole dollars rounded to the nearest whole number. Depreciationarrow_forwardProblem 4 The following information pertains to Bosh Inc.'s depreciable assets: • Machine Y cost P525,000 and was acquired on January 1, 2016. On the acquisition date, the expected useful life was 12 years with no residual value. The straight line method was used. On January 1, 2020, it was estimated that the remaining life of the asset would be 4 years and that there would be a P25,000 residual value. • A building was purchased on January 1, 2017 for P3,000,000. The building was expected to have a useful life of 20 years with no residual value. The straight line depreciation method was used. On January 1, 2020, a change was made to the sum-of-the-years'-digits method of depreciation. No change was made to the estimated useful life and residual value of the building. _3. What is the depreciation expense of Machine Y for 2020? _4. What is the depreciation expense of building for 2022?arrow_forwardProblem 11-11 (Algo) Error correction; change in depreciation method [LO11-2, 11-6, 11-7] Collins Corporation purchased office equipment at the beginning of 2022 and capitalized a cost of $2,130,000. This cost figure included the following expenditures: Purchase price Freight charges Installation charges Annual maintenance charge Total The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2022 and 2023. In 2024, after the 2023 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment. Required: 1. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2024. 2.…arrow_forward
- Exercise 11-24 (Algo) Change in principle; change in depreciation methods [LO11-2, 11-6] Alteran Corporation purchased office equipment for $2.2 million at the beginning of 2022. The equipment is being depreciated over a 10-year life using the double-declining-balance method. The residual value is expected to be $700,000. At the beginning of 2024 (two years later), Alteran decided to change to the straight-line depreciation method for this equipment. Required: Prepare the journal entry to record depreciation for the year ended December 31, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in whole dollars. View transaction list View journal entry worksheet Event 1 No 1 General Journal Depreciation expense Accumulated depreciation Debit Credit Tecnalarrow_forward13 On January 2, 2020, VSG purchased a transportation equipment costing P2,400,000. The new asset has an estimated useful life of 8 years with no salvage value. VSG depreciates this type of asset using the straight-line method. On January 1, 2022, VSG determined that the machine had a remaining useful life of 6 years from the date of acquisition with no salvage value. How much is the revised depreciation for 2022?arrow_forwardS10-8 Partial-year depreciation On 31 March 2016, Kinko's purchased a copying machine for $80000. Kinko's expects the machine to last for five years and to have a residual value of $8000. Requirement Calculate depreciation on the machine for the year ended 31 December 2016, using the straight-line method.arrow_forward
- Required information Exercise 11-2 (Algo) Depreciation methods [LO11-2] [The following information applies to the questions displayed below.] On January 1, 2024, the Allegheny Corporation purchased equipment for $134,000. The estimated service life of the equipment is 10 years and the estimated residual value is $2,000. The equipment is expected to produce 240,000 units during its life. Required: Calculate depreciation for 2024 and 2025 using each of the following methods. Exercise 11-2 (Algo) Part 2 2. Double-declining-balance. Formula Amount for 2024 Amount for 2025 Beginning Book Value $ $ Double-Declining-Balance Method x Proportion of Units Produced 203,000 X 192,850 x = Depreciation Expense 20% = 20% =arrow_forwardExercise 11-9 (Static) IFRS; revaluation of equipment; depreciation; partial periods [LO11-10] [The following information applies to the questions displayed below.] Exercise 11-9 (Static) Part 1 Dower Corporation prepares its financial statements according to IFRS. On March 31, 2024, the company purchased equipment for $240,000. The equipment is expected to have a six-year useful life with no residual value. Dower uses the straight-line depreciation method for all equipment. On December 31, 2024, the end of the company's fiscal year, Dower chooses to revalue the equipment to its fair value of $220,000. Required: 1. Calculate depreciation for 2024. 2-a. Calculate the revaluation of the equipment. 2-b. Prepare the journal entry to record the revaluation of the equipment. 3. Calculate depreciation for 2025. Complete this question by entering your answers in the tabs below. No 1 Req 1 Reg 2A Req 2B Prepare the journal entry to record the revaluation of the equipment. Note: If no entry is…arrow_forward32 Assume that on 31st December 2014 Ali and Sons Company purchased a machine for OMR 20000 and expecting the salvage value after its useful life of 5 years is OMR 2000. Calculate the book value of the machine on 31st December 2018 by following Straight line depreciation method. a. OMR 5600 b. OMR 14000 c. OMR 9200 d. OMR 2000 Clear my choicearrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning