18,500 loss Fixed Assets and Intangible Assets

Chapter 9 Fixed Assets and Intangible Assets

443 Instructions 1. Assign each payment and receipt to Land unlimited life, Land Improvements limited life, Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows: Item land land Improvements Building Other Accounts 2. Determine the amount debited to Land, Land Improvements, and Building. 3. The costs assigned to the land, which is used as a plant site, will not be de- preciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation. 4. What would be the effect on the income statement and balance sheet if the cost of filling and grading land of 12,000 [payment i] was incorrectly classified as Land Improvements rather than Land? Assume Land Improvements are depreciated over a 20-year life using the double-declining-balance method. PR 9-2A Comparing three depreciation methods OBJ. 2 Waldum Company purchased packaging equipment on January 5, 2012, for 135,000. The equipment was expected to have a useful life of three years, or 18,000 operating hours, and a residual value of 13,500. The equipment was used for 8,600 hours during 2012, 5,300 hours in 2013, and 4,100 hours in 2014. Instructions 1. Determine the amount of depreciation expense for the years ended December 31, 2012, 2013, and 2014, by a the straight-line method, b the units-of-output method, and c the double-declining-balance method. Also determine the total depreciation expense for the three years by each method. The following columnar headings are suggested for recording the depreciation expense amounts: Depreciation Expense Year Straight- line Method Units-of- Output Method Double-Declining- Balance Method 2. What method yields the highest depreciation expense for 2012? 3. What method yields the most depreciation over the three-year life of the equipment? PR 9-3A Depreciation by three methods; partial years OBJ. 2 Perdue Company purchased equipment on April 1, 2012, for 270,000. The equipment was expected to have a useful life of three years, or 18,000 operating hours, and a residual value of 9,000. The equipment was used for 7,500 hours during 2012, 5,500 hours in 2013, 4,000 hours in 2014, and 1,000 hours in 2015. Instructions Determine the amount of depreciation expense for the years ended December 31, 2012, 2013, 2014, and 2015, by a the straight-line method, b the units-of-output method, and c the double-declining-balance method. PR 9-4A Depreciation by two methods; sale of fixed asset OBJ. 2, 3 New lithographic equipment, acquired at a cost of 800,000 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of 90,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected. In the first week of the fifth year, the equipment was sold for 135,000. Instructions 1. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by a the straight-line method and b the

1. a. 2012: straight- line depreciation,

40,500

a. 2012: 65,250

1. b. Year 1: 320,000 depreciation expense

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Chapter 9 Fixed Assets and Intangible Assets