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Class25 - Solutions

# Class25 - Solutions - EXERCISE 22-6(a Depreciation to date...

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EXERCISE 22-6 (a) Depreciation to date on equipment Sum-of-the-years’-digits depreciation 2005 (5/15 x \$510,000) \$170,000 2006 (4/15 x \$510,000) 136,000 2007 (3/15 x \$510,000) 102,000 \$408,000 Cost of equipment \$525,000 Depreciation to date 408,000 Book value (December 31, 2007) \$117,000 Book value – Salvage value = Depreciable cost \$117,000 – \$15,000 = \$102,000 Depreciation for 2008: \$102,000/2 = \$51,000 Depreciation Expense ................................... 51,000 Accumulated Depreciation—Equipment 51,000 (b) Depreciation to date on building \$693,000/30 years = \$23,100 per year \$23,100 x 3 = \$69,300 depreciation to date Cost of building \$693,000 Depreciation to date 69,300 Book value (December 31, 2007) \$623,700 Depreciation for 2008: \$623,700/(40 – 3) = \$16,856.76 Depreciation Expense ................................... 16,856.76 Accumulated Depreciation—Buildings 16,856.76 1

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EXERCISE 22-11 (a) No entry necessary. Changes in estimates are treated prospectively. (b) Depreciation Expense ...................................... 19,375* Accumulated Depreciation—Equipment. 19,375 *Original cost \$510,000 Accumulated depreciation [(\$510,000 – \$10,000) ÷ 10] x 7 (350,000 ) Book value (1/1/08) 160,000 Estimated salvage value (5,000 ) Remaining depreciable basis 155,000 Remaining useful life (15 years – 7 years) ÷ 8 Depreciation expense—2008 \$ 19,375 2
EXERCISE 22-12 (a) Cost of plant assets \$1,600,000 Less: Depreciation prior to 2008 2005 (\$1,600,000 x .25) \$400,000 2006 (\$1,200,000 x .25) 300,000 2007 (\$ 900,000 x .25) 225,000 925,000 Book value at January 1, 2008 \$675,000 2008 Depreciation: (\$675,000 – \$100,000) ÷ 5 = \$115,000 Depreciation Expense ................................... 115,000 Accumulated Depreciation—Plant Assets 115,000 2008 2007 (b) Income before depreciation expense \$300,000 \$270,000 Depreciation expense

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Class25 - Solutions - EXERCISE 22-6(a Depreciation to date...

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