Homework Session 14 Spring 2010

# Homework Session 14 Spring 2010 - Homework Session 14...

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Homework Session 14 Spring 2010 ANSWERS TO MULTIPLE CHOICE 1. b 2. d 3. d 4. c 5. b 6. c 7. d 8. d 9. d 10. c M8–3. (1) R (2) C (3) C (4) R (5) C (6) N (7) C (8) R (9) N

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M8–4. Machinery (original cost) \$21,000 Accumulated depreciation at end of third year Depreciation expense = (\$21,000 cost – \$1,000 residual value) x 1/4 years = \$5,000 Accumulated depreciation = \$5,000 annual depreciation expense x 3 yrs = 15,000 Net book value at the end of the third year \$6,000 M8–5. Machinery (original cost) \$25,000 Accumulated depreciation at end of first year: Depreciation expense = (\$25,000 – \$0 acc. depr.) x 2 / 5 yrs. = \$10,000 10,000 Net book value at end of first year \$15,000 Machinery (original cost) \$25,000 Accumulated depreciation at end of second year: Depreciation expense = (\$25,000 - \$10,000 acc. depr.) x 2 / 5 = \$6,000 Accumulated depreciation = Year 1, \$10,000 + Year 2, \$6,000 = 16,000 Net book value at end of second year \$9,000 Machinery (original cost) \$25,000 Accumulated depreciation at end of third year: Depreciation expense = (\$25,000 - \$16,000 acc. depr.) x 2 / 5 = \$3,600 Accumulated depreciation = (\$16,000 + Year 3, \$3,600) = 19,600 Net book value at end of third year \$5,400 M8–6. Machinery (original cost) \$21,000 Accumulated depreciation at end of third year Depreciation expense per machine hour = (\$21,000 cost – \$1,000 salvage value) = \$1 per machine hour 20,000 machine hours Accumulated depreciation Yr 1 Yr 2 Yr 3 = \$1 depreciation expense per machine hr x (3,200+7,050+7,500) hrs = 17,750 Net book value at end of third year \$3,250
M8–7. Impairment Loss Cost - Fair Value a. Machine Y \$7,000 \$15,500 -\$ 8,500 b. Copyright N Estimated cash flows exceed book value c. Factory building Y \$32,000 \$58,000 - \$26,000 d. Building N Estimated cash flows equal book value M8–8. Store fixtures (original cost) \$6,000 Accumulated depreciation at end of tenth year Depreciation expense = (\$6,000 cost – \$800 residual value) x 1/13 years = \$400 Accumulated depreciation = \$400 annual depreciation expense x 10 yrs = 4,000 Net book value at end of tenth year (i.e., NBV immediately prior to sale)

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