Fin-Acctg7-SM-Ch07

Fin-Acctg7-SM-Ch07 - Chapter 7 Plant Assets and Intangibles...

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Unformatted text preview: Chapter 7 Plant Assets and Intangibles Short Exercises (5 min.) S 7-1 1. Property and Equipment, at Cost Millions Aircraft $ 8,611 Package handling and ground support equipment. 3,558 Computer and electronic equipment. 4,331 Vehicles. 2,203 Facilities and other. 5,371 Total cost.. 24,074 Less: Accumulated depreciation.. (13,304 ) Net property and equipment $ 10,770 2. Cost = $24,074 million Book value = $10,770 million Book value is less than cost because accumulated depreciation is subtracted from cost to compute book value. Chapter 7 Plant Assets and Intangibles 157 (5 min) S 7-2 The related costs (real estate commission, back property tax, removal of a building, and survey fee) are included as part of the cost of the land because the buyer of the land must incur these costs to get the land ready for its intended use. After the land is ready for use, the related costs (listed above) would be expensed. (10 min.) S 7-3 Land ($150,000 .40). 60,000 Building ($150,000 .40)... 60,000 Equipment ($150,000 .20).. 30,000 Note Payable 150,000 Estimated Market Value Percent of Total Land. $ 80,000 $80,000 / $200,000 = 40.0% Building... 80,000 $80,000 / $200,000 = 40.0 Equipment.. 40,000 $40,000 / $200,000 = 20.0 Total. $200,000 100.0 % Financial Accounting 7/e Solutions Manual 158 (5 min.) S 7-4 Income Statement Revenues CORRECT Expenses UNDERSTATED Net income OVERSTATED (10 min.) S 7-5 1. First-year depreciation: Straight-line ($25,000,000 $5,000,000) / 5 years. $4,000,000 Units-of-production [($25,000,000 $5,000,000) / 5,000,000 miles] 750,000 miles.. $3,000,000 Double-declining-balance ($25,000,000 / 5 years 2.. $10,000,000 2. Book value: Straight- Line Units-of- Production Double- Declining- Balance Cost. $25,000,000 $25,000,000 $25,000,000 Less Accumulated Depreciation.. (4,000,000 ) (3,000,000 ) (10,000,000 ) Book value. $21,000,000 $22,000,000 $15,000,000 Chapter 7 Plant Assets and Intangibles 159 (10 min.) S 7-6 Third-year depreciation: a. Straight-line ($25,000,000 $5,000,000) / 5 years.. $4,000,000 b. Units-of-production [($25,000,000 $5,000,000) / 5,000,000 miles] 1,250,000 miles $5,000,000 c. Double-declining-balance: Year 1 ($25,000,000 2/5) = $10,000,000 Year 2 ($25,000,000 $10,000,000) 2/5 = $6,000,000 Year 3 ($25,000,000 $10,000,000 $6,000,000 = $9,000,000; $9,000,000 2/5... $3,600,000 Financial Accounting 7/e Solutions Manual 160 (10 min.) (10 min....
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Fin-Acctg7-SM-Ch07 - Chapter 7 Plant Assets and Intangibles...

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