Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Chapter 7, Problem 7.8S
LO3
(Learning Objective 3: Compute
a. Depreciation expense
b.
c. Book value
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Chapter 7 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Ch. 7 - Smatter Corporation purchased land for a new...Ch. 7 - Carlos Company purchased a building and land for...Ch. 7 - Whitmore Corporation purchased a new delivery van...Ch. 7 - When a company expenses the cost of maintenance...Ch. 7 - Prob. 5QCCh. 7 - Planter Company purchased a delivery van for...Ch. 7 - Bixby Corporation purchased a forklift for 40,000...Ch. 7 - On the first day of its fiscal year, Spearhead...Ch. 7 - The depreciation method that does not initially...Ch. 7 - Sokolsky Excavating purchased a used dump truck...
Ch. 7 - Barron Fuel purchased an oil well for 200,000. The...Ch. 7 - Prob. 12QCCh. 7 - Prob. 13QCCh. 7 - Prob. 14QCCh. 7 - Prob. 15QCCh. 7 - Prob. 16QCCh. 7 - Prob. 7.1ECCh. 7 - LO 1 (Learning Objective 1: Measure the cost and...Ch. 7 - LO 1 (Learning Objective 1: Measure and record the...Ch. 7 - Prob. 7.3SCh. 7 - Prob. 7.4SCh. 7 - LO 3 (Learning Objective 3: Compute depreciation...Ch. 7 - Prob. 7.6SCh. 7 - LO 3 (Learning Objective 3: Compute depreciation...Ch. 7 - LO3 (Learning Objective 3: Compute depreciation...Ch. 7 - LO 3 (Learning Objective 3: Compute depreciation...Ch. 7 - LO 3 (Learning Objective 3: Compute depreciation...Ch. 7 - LO 3 (Learning Objective 3: Compute depreciation...Ch. 7 - Prob. 7.12SCh. 7 - Prob. 7.13SCh. 7 - Prob. 7.14SCh. 7 - Prob. 7.15SCh. 7 - Prob. 7.16SCh. 7 - Prob. 7.17SCh. 7 - LO 6 (Learning Objective 6: Explain the effect of...Ch. 7 - Prob. 7.19SCh. 7 - LO 7 (Learning Objective 7: Calculate return on...Ch. 7 - Prob. 7.21SCh. 7 - Prob. 7.22AECh. 7 - Prob. 7.23AECh. 7 - LO 2 (Learning Objective 2: Distinguish capital...Ch. 7 - Prob. 7.25AECh. 7 - LO 3 (Learning Objective 3: Determine depreciation...Ch. 7 - LO 1,3,8 E7-27A, (Learning Objectives 1, 3, 8:...Ch. 7 - LO 3 (Learning Objective 3: Change a plant assets...Ch. 7 - LO 3, 4 (Learning Objectives 3, 4: Compute...Ch. 7 - Prob. 7.30AECh. 7 - LO 1, 3, 4 (Learning Objectives 1, 3, 4: Measure a...Ch. 7 - Prob. 7.32AECh. 7 - Prob. 7.33AECh. 7 - Prob. 7.34AECh. 7 - LO 7 (Learning Objective 7: Calculate return on...Ch. 7 - Prob. 7.36AECh. 7 - Prob. 7.37BECh. 7 - Prob. 7.38BECh. 7 - Prob. 7.39BECh. 7 - Prob. 7.40BECh. 7 - Prob. 7.41BECh. 7 - Prob. 7.42BECh. 7 - LO 3 (Learning Objective 3: Change a plant assets...Ch. 7 - LO 3.4 (Learning Objectives 3.4: Compute...Ch. 7 - Prob. 7.45BECh. 7 - Prob. 7.46BECh. 7 - Prob. 7.47BECh. 7 - Prob. 7.48BECh. 7 - Prob. 7.49BECh. 7 - Prob. 7.50BECh. 7 - Prob. 7.51BECh. 7 - Prob. 7.52QCh. 7 - Prob. 7.53QCh. 7 - Prob. 7.54QCh. 7 - Prob. 7.55QCh. 7 - Prob. 7.56QCh. 7 - Madison Corporation acquired a machine for 27,000...Ch. 7 - Prob. 7.58QCh. 7 - Prob. 7.59QCh. 7 - Prob. 7.60QCh. 7 - Prob. 7.61QCh. 7 - Prob. 7.62QCh. 7 - Prob. 7.63QCh. 7 - Prob. 7.64QCh. 7 - Prob. 7.65QCh. 7 - Prob. 7.66QCh. 7 - Prob. 7.67APCh. 7 - (Learning Objectives 1, 3: Measure and account for...Ch. 7 - (Learning Objectives 1, 3, 4: Measure and account...Ch. 7 - Prob. 7.70APCh. 7 - (Learning Objectives 1, 3, 4, 6, 8: An21yze plant...Ch. 7 - Prob. 7.72APCh. 7 - (Learning Objectives 1, 4, 8: Analyze the effect...Ch. 7 - Prob. 7.74APCh. 7 - (Learning Objectives 4, 8: Analyze the effect of a...Ch. 7 - Prob. 7.76BPCh. 7 - Prob. 7.77BPCh. 7 - Prob. 7.78BPCh. 7 - Prob. 7.79BPCh. 7 - Prob. 7.80BPCh. 7 - Prob. 7.81BPCh. 7 - (Learning Objectives 1, 4, 8: Analyze the effect...Ch. 7 - Prob. 7.83BPCh. 7 - Prob. 7.84BPCh. 7 - LO 3 (Learning Objective 3: Determine the effect...Ch. 7 - Prob. 7.86CEPCh. 7 - Prob. 7.87CEPCh. 7 - Prob. 7.88SCCh. 7 - Prob. 7.89DCCh. 7 - Prob. 7.90DCCh. 7 - Prob. 7.91EICCh. 7 - Prob. 1FFCh. 7 - Focus on Analysis Under Armour, Inc. LO 1, 3, 5,...
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- (Learning Objectives 3, 4: Compute depreciation; record a gain or loss on disposal)On January 1, 2017, Lincoln Manufacturing purchased a machine for $930,000. The companyexpected the machine to remain useful for eight years and to have a residual value of $110,000.Lincoln Manufacturing uses the straight-line method to depreciate its machinery. LincolnManufacturing used the machine for four years and sold it on January 1, 2021, for $250,000.1. Compute accumulated depreciation on the machine at January 1, 2021 (same as December 31,2020).2. Record the sale of the machine on January 1, 2021.arrow_forward(Learning Objectives 3, 4: Compute depreciation; record a gain or loss on disposal)On January 1, 2017, Worldwide Manufacturing purchased a machine for $810,000 that itexpected to have a useful life of four years. The company estimated that the residual value ofthe machine was $50,000. Worldwide Manufacturing used the machine for two years and soldit on January 1, 2019, for $350,000. As of December 31, 2018, the accumulated depreciation onthe machine was $380,000.1. Calculate the gain or loss on the sale of the machinery.2. Record the sale of the machine on January 1, 2019.arrow_forwardLearning Objective 3: Compute partial year depreciation, and select the bestdepreciation method) Assume that on September 30, 2017, EuroAir, an international airlinebased in Germany, purchased a Jumbo aircraft at a cost of €45,000,000 (€ is the symbol for theeuro). EuroAir expects the plane to remain useful for four years (4,000,000 miles) and to havea residual value of €6,000,000. EuroAir will fly the plane 350,000 miles during the remainderof 2017. Compute EuroAir’s depreciation on the plane for the year ended December 31, 2017,using the following methods:a. Straight-lineb. Units-of-productionc. Double-declining-balanceWhich method would produce the highest net income for 2017? Which method produces thelowest net income?arrow_forward
- (Learning Objective 3: Compute and record depreciation after a change in usefullife of the asset) Fun Town Amusement Park paid $500,000 for a concession stand. Fun Townstarted out depreciating the building using the straight-line method over 25 years with a residualvalue of zero. After using the concession stand for four years, Fun Town determines that thebuilding will remain useful for only five more years. Record Fun Town’s depreciation on theconcession stand for year five using the straight-line method.arrow_forwardE7-22A. (Learning Objective 1: Measure the cost of plant assets) Murphy Self Storagepurchased land, paying $160,000 cash as a down payment and signing a $185,000 note payablefor the balance. Murphy also had to pay delinquent property tax of $2,000, title insurance costing$6,000, and $11,000 to level the land and remove an unwanted building. The company paid$58,000 to add soil for the foundation and then constructed an office building at a cost of $700,000.It also paid $52,000 for a fence around the property, $11,000 for the company sign near theproperty entrance, and $3,000 for lighting of the grounds. What is the capitalized cost of eachof Murphy’s land, land improvements, and building?arrow_forwardUse AstroTurf Company's income statement below to answer the following questions.Operating costs (excl. depreciations & amortization): $4.5mDepreciation and amortization: $1.5mInterest: $0.7mNet Income: $2.8mTax Rate: 35%a. Calculate AstroTurf’s EBITDA. Provide a step-by-step explanation for how you arrived at your above solution as though you were teaching a student to solve this type of problem. Provide a clear explanation, showing any steps or processes used to reach the answer.b. What level of sales would generate a net income of $4.2m for the following year, knowing that operating costs (excl. depreciation and amortization) will increase by 7.5%, and given a 35% tax rate. Provide a step-by-step explanation for how you arrived at your above solutionarrow_forward
- (Learning Objective 3: Compute depreciation and book value by three methods—firstyear only) On January 1, 2017, Northeast Transportation Company purchased a used aircraftat a cost of $58,900,000. Northeast expects the plane to remain useful for five years(7,200,000 miles) and to have a residual value of $4,900,000. Northeast expects to fly the plane750,000 miles the first year, 1,375,000 miles each year during the second, third, and fourthyears, and 2,325,000 miles the last year.1. Compute Northeast’s depreciation for the first two years on the plane using the followingmethods:a. Straight-line methodb. Units-of-production method (round depreciation per mile to the closest cent)c. Double-declining-balance method2. Show the airplane’s book value at the end of the first year under each depreciation method.arrow_forward(Learning Objective 3: Determine depreciation amounts by three methods) PresleyPizza bought a used Ford delivery van on January 2, 2018, for $22,000. The van was expected toremain in service for four years (80,000 miles). At the end of its useful life, Presley managementestimated that the van’s residual value would be $2,000. The van traveled 32,000 miles the firstyear, 28,000 miles the second year, 15,000 miles the third year, and 5,000 miles in the fourth year.Requirements1. Prepare a schedule of depreciation expense per year for the van under the threedepreciation methods discussed in this chapter. (For units-of-production and doubledeclining-balance methods, round to the nearest two decimal places after each step of thecalculation.)2. Which method best tracks the wear and tear on the van?3. Which method would Presley prefer to use for income tax purposes? Explain yourreasoning in detail.arrow_forwardTo 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.arrow_forward
- Use AstroTurf Company's income statement below to answer the following questions. Operating costs (excl. depreciations & amortization): $4.5mDepreciation and amortization: $1.5mInterest: $0.7mNet Income: $2.8mTax Rate: 35%1. Calculate AstroTurf’s EBITDA. Input your final answer here : Explanation: Provide a step-by-step explanation for how you arrived at your above solution as though you were teaching a student to solve this type of problem. Provide a clear explanation, showing any steps or processes used to reach the answer. What level of sales would generate a net income of $4.2m for the following year, knowing that operating costs (excl. depreciation and amortization) will increase by 7.5%, and given a 35% tax rate. Explanation: Provide a step-by-step explanation for how you arrived at your solution as though you were teaching a student to solve this type of problem.arrow_forward(Learning Objective 3: Determine depreciation amounts by three methods) LimaPizza bought a used Toyota delivery van on January 2, 2018, for $18,600. The van wasexpected to remain in service for four years (57,000 miles). At the end of its useful life, Limamanagement estimated that the van’s residual value would be $1,500. The van traveled 20,500miles the first year, 16,000 miles the second year, 15,400 miles the third year, and 5,100 milesin the fourth year.Requirements1. Prepare a schedule of depreciation expense per year for the van under the three depreciationmethods discussed in this chapter. (For units-of-production and double-declining-balancemethods, round to the nearest two decimal places after each step of the calculation.)2. Which method best tracks the wear and tear on the van?3. Which method would Lima prefer to use for income tax purposes? Explain your reasoningin detail.arrow_forward(Learning Objective 5: Account for the depletion of a company’s naturalresources) Jackson Petroleum, a giant oil company, holds reserves of oil and gas assets. Atthe end of 2018, assume the cost of Jackson’s oil reserves totaled $180 billion, representing10 billion barrels of oil in the ground.1. Which depreciation method is similar to the depletion method that Jackson and other oilcompanies use to compute their annual depletion expense for the oil removed from theground?2. Suppose the company removed 1,000 million barrels of oil during 2019. Record this event.Show amounts in billions.3. Assume that, of the amount removed in (2), the company sold 800 million barrels. Makethe cost of sales entryarrow_forward
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