# w3 homework answers[1] - Chapter 11 Homework Brief Exercise...

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Chapter 11 Homework Brief Exercise 11-11 Because the undiscounted sum of future cash flows of \$24 million is less than book value of \$26.5 million, there is an impairment loss. The impairment loss is calculated as follows: Book value \$26.5 million Fair value 21 .0 million Impairment loss \$ 5.5 million

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Brief Exercise 11-14 Annual maintenance on machinery , \$5,400 - This is an example of normal repairs and maintenance . Future benefits are not increased; therefore the expenditure should be expensed in the period incurred. Remodeling of offices , \$22,000 - This is an example of an improvement . The cost of the remodeling should be capitalized and depreciated, either by (1) substitution, (2) direct capitalization of the cost, or (3) a reduction of accumulated depreciation. Rearrangement of the shipping and receiving area , \$35,000 - This is an example of a rearrangement . Because the rearrangement increased productivity, the cost should be capitalized and depreciated. Addition of a security system , \$25,000 - This is an example of an addition . The cost of the security system should be capitalized and depreciated. Exercise 11-1 1. Straight-line: \$33,000 - 3,000 = \$6,000 per year 5 years 2. Sum-of-the-years’ digits: Year Depreciable Base X Depreciation Rate per Year = Depreciation 2009 \$30,000 \$10,000 2010 30,000 8,000 2011 30,000 6,000 2012 30,000 4,000 2013 30,000 2,000 Total \$30,000
Exercise 11-1 (concluded) 3. Double-declining balance: Straight-line rate of 20% (1 ÷ 5 years) x 2 = 40% DDB rate. Year

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w3 homework answers[1] - Chapter 11 Homework Brief Exercise...

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