7111AFE_Solution_Topic09_new

7111AFE_Solution_Topic09_new - 7111AFE Tutorial Solution...

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7111AFE Tutorial Solution: Topic 9 (10-15 min.) E 11-6 Depreciation Expense Per Year Year Straight-Line Units-of-Production Reducing-Balance 20X6 $ 3,000 $ 1,200 $ 4,965 20X7 3,000 3,600 3,322 20X8 3,000 2,160 1,856.5 20X9 3,000 2,400 1,856.5 $12,000 $12,000 $12,000 __________ Calculations: Straight-line: ($15,000 - $3,000) ÷ 4 = $3,000 per year. Units-of-production: ($15,000 - $3,000) ÷ 1,000 operations = $12 per operation; 100 x $12= $1,200; 300 x $12 = $3,600; 400 x $12 = $4,800; 200 x $12 = $2,400. Reducing-balance: $15,000 x (1 - .669 = .331) = $4,965; ($15,000 - $4,965) x .331= $3,322; Switching to straight-line method ($15,000 - $4,965 - $3,322) = $6,713 - $3,000 residual value = $3,713 ÷ 2 = $1,856.5 The units-of-production method tracks the wear and tear on the equipment most closely. For income-tax purposes, the reducing-balance method is best because it provides the most depreciation and thus the largest tax deductions in the early life of the asset. This conserves cash.
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(10-15 min.) E 11-11 General Journal DATE ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT 20X4 Jul. 1 Accumulated Depreciation - Property 500,000 Property 1,000,000 Asset Revaluation Reserve 1,500,000 Jun. 30 Depreciation Expense ($3,000,000 ÷ 20) 150,000 Accumulated Depreciation - Property 150,000 20X5 20X6 20X7 Jun. 30 Depreciation Expense 150,000 Accumulated Depreciation - Property 150,000 20X7 Jul. 1 Accumulated Depreciation - Property ($150,000 x 4) 600,000 Asset Revaluation Reserve 200,000 Property 800,000
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(10-15 min.) E 11-12 General Journal DATE
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