Concept explainers
1.
Straight-line
Double-declining-balance method: It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less
To Calculate: the amount of depreciation expense for the computer under straight-line method for the year ended December 31, 2016.
2.
To record: the
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HORNGREN'S FINANCIAL & MANAGERIAL ACCO
- 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.arrow_forwardDepreciation On July 1, 2016, Dexter Corp. buys a computer system for $260,000 in cash. Assume that the computer is expected to have a four-year life and an estimated salvage value of $20,000 at the end of that time. Required Prepare the journal entry to record the purchase of the computer on July 1, 2016. Compute the depreciable cost of the computer. Using the straight-line method, compute the monthly depreciation. Prepare the adjusting entry to record depreciation at the end of July 2016. Compute the computers carrying value that will be shown on Dexters balance sheet prepared on December 31, 2016.arrow_forwardChange in Estimate Assume that Bloomer Company purchased a new machine on January 1, 2016, for $80,000. The machine has an estimated useful life of nine years and a residual value of $8,000. Bloomer has chosen to use the straight-line method of depreciation. On January 1, 2018, Bloomer discovered that the machine would not be useful beyond December 31, 2021, and estimated its value at that time to be $2,000. Required Calculate the depreciation expense, accumulated depreciation, and book value of the asset for each year 2016 to 2021. Was the depreciation recorded wrong in 2016 and 2017? If so, why was it not corrected?arrow_forward
- Revision of Depreciation On January 1, 2017, Blizzards-R-Us purchased a snow-blowing machine for $125,000. The machine was expected to have a residual value of $12,000 at the end of its 5-year useful life. On January 1, 2019, Blizzards-R-Us concluded that the machine would have a remaining useful life of 6 years with a residual value of $3,600. Required: 1. Determine the revised annual depreciation expense for 2019 using the straight-line method. 2. CONCEPTUAL CONNECTION How does the revision in depreciation affect the Blizzards-R-Us financial statements?arrow_forwardComparative Analysis: Under Armour, Inc., versus Columbia Sportswear Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com. Required: With regard to depreciation methods: a. What depreciation method does Under Armour use? What depreciation method does Columbia use? b. What are the typical useful lives of each companys operating assets? c. What effect will the useful lives have on the companys financial statements?arrow_forwardDepreciation Expense During 2016, Carter Company acquired three assets with the following costs, estimated useful lives, and estimated salvage values: The company uses the straight-line method to depreciate all assets and computes depreciation to the nearest month. For example, the computer system will be depreciated for six months in 2016. Required Compute the depreciation expense that Carter will record on each of the three assets for 2016. Comment on the following statement: Accountants could save time and money by simply expensing the cost of long-term assets when they are purchased. In addition, this would be more accurate because depreciation requires estimates of useful life and salvage value.arrow_forward
- Use the information in Problem A-1 to solve this problem. Required Prepare a schedule of depreciation using the double-declining-balance method. 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. Check Figure Year 2 depreciation, 4,500arrow_forwardUse the information in Problem A-1 to solve this problem. Assume that the van is five-year property for tax purposes. Required Prepare a schedule of depreciation under MACRS. Round figures to the nearest whole dollar. 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. Check Figure Year 3 depreciation, 3,456arrow_forwardEffect of depreciation on net income Einstein Construction Co. specializes in building replicas of historic houses. Bree Andrus. president of Einstein Construction, is considering the purchase of various items of equipment on July 1. 20Y2. for $300,000. 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, Bee is considenng depreciating the equipment by the straight-line method. She discussed the matter with her CPA and learned that although the straight-line method could be elected, it was to her advantage to use the Modified Accelerated Cost Recovery System (MACRS) for tax purposes. She asked for your advice as to which method to use for tax purposes. What factors would you present for Bree’s consideration in the selection of a depreciation method?arrow_forward
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