Answers to Chapter 8 In-Class Exercises.pdf - Answers to Chapter 8 In-Class Exercises 1 Total cost to be allocated between building and land = price

Answers to Chapter 8 In-Class Exercises.pdf - Answers to...

This preview shows page 1 - 2 out of 2 pages.

1 Answers to Chapter 8 In-Class Exercises 1. Total cost to be allocated between building and land = price paid ($356,000) + transfer costs ($4,000) = $360,000. Please note that renovation cost ($46,000) should be added to building only because renovation was not applied to land. Appraised Value Allocation of Lump-Sum Cost Item Amount Ratio Total Cost Allocated Cost Building $300,000 75% × $360,000 = $270,000 Land 100,000 25% × 360,000 = 90,000 $400,000 100% $360,000 Cost of building = allocated cost per above ($270,000) + renovation cost ($46,000) = $316,000 Cost of land = allocated cost per above $90,000 2. D 3. B 4. C 5. D 6. Straight line Year Computation Depreciation Expense Accumulated Depreciation Carrying Amount At acquisition $380,000 1 (380,000-20,000)/3=120,000 120,000 120,000 260,000 2 (380,000-20,000)/3=120,000 120,000 240,000 140,000 3 (380,000-20,000)/3=120,000 120,000 360,000 20,000 Units of production: Depreciation rate per unit = (380,000-20,000)/180,000=$2 per unit Year Computation Depreciation Expense Accumulated Depreciation Carrying Amount At acquisition $380,000
Image of page 1

Subscribe to view the full document.

Image of page 2

Unformatted text preview: 1 83,000×2=166,000 166,000 166,000 214,000 2 60,000×2=120,000 120,000 286,000 94,000 3 37,000×2=74,000 74,000 360,000 20,000 Double declining balance Year Computation Depreciation Expense Accumulated Depreciation Carrying Amount At acquisition $380,000 1 380,000×2/3=253,333 253,333 253,333 126,667 2 126,667×2/3=84,445 84,445 337,778 42,222 3 42,222×2/3=28,148 28,148 365,926 14,074 22,222 360,000 20,000 7. B 8. D 9. B If we apply the formula in the final year, the carrying amount will be less than the residual value, which is not allowed! We must adjust the depreciation expense to make sure the carrying amount will not be depreciated below $20,000. 2 10. At 2017-12-31: Acquisition cost at 2016-01-01 $31,000 Less: Accumulated depreciation (from 2016-01-01 to 2017-12-31) (31,000 – 7,000)/6×2 = 8,000 Carrying amount 23,000 Add: Reconditioning (extraordinary betterment → capitalize) 5,200 New cost 28,200 Residual value (unchanged) 7,000 Remaining useful life 6 – 2+1 = 5 years Thus, depreciation expense for the year of 2018 = (28,200 – 7,000)/5 = 4,240...
View Full Document

  • Fall '13
  • Clark

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes