Help with Ch. 11 Homework (1)

# Help with Ch. 11 Homework (1) - BriefExercise112 a...

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Help with Chapter 11 Homework Brief Exercise 11–2 a. Straight-line: \$30,000 – 2,000 = \$7,000 per year 4 years b. Sum-of-the-years’ digits: Sum-of-the-digits is ([4 (4 + 1)] ÷ 2) = 10 2016 \$28,000 x 4/10 = \$11,200 2017 \$28,000 x 3/10 = \$ 8,400 c. Double-declining balance: Straight-line rate is 25% (1 ÷ 4 years) x 2 = 50% DDB rate 2016 \$30,000 x 50% = \$15,000 2017 (\$30,000 – 15,000) x 50% = \$ 7,500 d. Units-of-production: \$30,000 – 2,000 = \$2.80 per unit depreciation rate 10,000 hours 2016 2,200 hours x \$2.80 = \$6,160 2017 3,000 hours x \$2.80 = \$8,400 Brief Exercise 11–4 Annual depreciation will equal the group rate multiplied by the original cost of the group: 1

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\$425,000 x 18% = \$76,500 Since depreciation records are not kept on an individual asset basis, dispositions are recorded under the assumption that the book value of the disposed item exactly equals any proceeds received and no gain or loss is recorded. Any actual gain or loss is implicitly included in the accumulated depreciation account. Journal entry (not required): Cash ................................................................................ 35,000 Accumulated depreciation (difference) ............................ 7,000 Equipment (account balance) .......................................... 42,000 Brief Exercise 11–5 \$8,250,000 Depletion per foot = = \$2.75 per foot 3,000,000 cubic feet Year 1 depletion = \$2.75 x 700,000 feet = \$1,925,000 Year 2 depletion = \$2.75 x 800,000 feet = \$2,200,000 2
Brief Exercise 11–6 Expenses for the year include: Amortization of the patent = \$400,000 Amortization of the developed technology * = 300 ,000 Total \$700,000 Goodwill is not amortized. In-process research and development is not amortized. Amortization of the patent: (\$4,000,000 5) x 6/12 = \$400,000 *Amortization of the developed technology: (\$3,000,000 5) x 6/12 = \$300,000 Brief Exercise 11–7 Calculation of annual depreciation after the estimate change: \$9,000,000 Cost \$320,000 Previous annual depreciation (\$8 million ÷ 25 years) x 2 years 640 ,000 Depreciation to date (2014–2015) 8,360,000 Undepreciated cost 500 ,000 Revised residual value 7,860,000 Revised depreciable base  18 \$ 436,667 2016 depreciation 3

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Brief Exercise 11–8 In general, we report voluntary changes in accounting principles retrospectively. However, a change in depreciation method is considered a change in accounting estimate resulting from a change in accounting principle. In other words, a change in the depreciation method reflects a change in the (a) estimated future benefits from the asset, (b) the pattern of receiving those benefits, or (c) the company’s knowledge about those benefits, and therefore the two events should be reported the same way. Accordingly, Robotics reports the change prospectively; previous financial statements are not revised. Instead, the company simply employs the double-declining-balance method from now on. The undepreciated cost remaining at the time of the change would be depreciated DDB over the remaining useful life.
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