Chapter 9 solutions on discussion questions

Chapter 9 solutions on discussion questions - BUSI1002...

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Class Discussion Chapter 9 Suggested Solutions for Discussion Questions Ex 9.2 a. Capital expenditure b. Revenue expenditure c. Revenue expenditure d. Capital expenditure e. Revenue expenditure (too small in amount to capitalize regardless of length of useful life) f. Capital expenditure Ex 9.4 a. (1) Straight-Line Schedule Depreciation Expense Accumulated Depreciation Book Year Computation Value 1 $35,000 x 1/5 $7,000 $7,000 $ 33,000 2 35,000 x 1/5 7,000 14,000 26,000 3 35,000 x 1/5 7,000 21,000 19,000 4 35,000 x 1/5 7,000 28,000 12,000 5 35,000 x 1/5 7,000 35,000 5,000 (2) 200% Declining-Balance Schedule Depreciation Expense Accumulated Book Year Computation Depreciation Value 1 $40,000 x 40% $16,000 $16,000 $ 24,000 2 24,000 x 40% 9,600 25,600 14,400 3 14,400 x 40% 5,760 31,360 8,640 4 8,640 x 40% 3,456 34,816 5,184 5 $5,184 – $5,000 184 35,000 5,000 (3) 150% Declining-Balance Schedule Depreciation Expense Accumulated Book Year Computation Depreciation Value 1 $40,000 x 30% $12,000 $12,000 $ 28,000 2 28,000 x 30% 8,400 20,400 19,600 3 19,600 x 30% 5,880 26,280 13,720 4* ($13,720 – $5,000)/ 2 yrs. 4,360 30,640 9,360 5* ($13,720 – $5,000)/ 2 yrs. 4,360 35,000 5,000 * Switch to straight-line b. Both accelerated methods result in a higher depreciation expense than the straight-line method in the first two years of the asset’s life. This pattern reverses in years 3 through 5. After four years, 99% of the asset’s total depreciation expense has been recorded under the 200% declining- balance method, as compared to only 88% under the 150% declining-balance method. 1
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Chapter 9 solutions on discussion questions - BUSI1002...

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