final review 2

# final review 2 - Chapter 8 Recommended problems AP8-3 AP8-5...

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Chapter 8 Recommended problems: AP8-3, AP8-5 AP8–3. Req. 1 Cost of each machine: Machine A B C Total Purchase price .................................... \$10,800 \$32,500 \$21,700 \$65,000 Installation costs ................................. 800 1,100 1,100 3,000 Renovation costs ................................ 600 1,400 1,600 3,600 Total cost ......................................... \$12,200 \$35,000 \$24,400 \$71,600 Req. 2 Computation of year 1 depreciation expense for each machine: Machine Method Computation A Straight-line (\$12,200 - \$1,000) x 1/8 years = \$1,400 B Units-of-production (\$35,000 - \$2,000) ÷ 33,000 hours = \$1.00 \$1.00 x 7,000 hours = \$7,000 C Double-declining-balance (\$24,400 - 0) x 2/5 years = \$9,760 Depreciation expense (\$1,400 + \$7,000 + \$9,760) (+E, - SE)…. 18,160 Accumulated depreciation, Machine A (+XA, - A)……… 1,400 Accumulated depreciation, Machine B (+XA, - A)……… 7,000 Accumulated depreciation, Machine C (+XA, - A)……… 9,760 AP8–5. Req. 1 a. Machine A - Jan. 1, 2007: (1) Depreciation expense in 2007 - none recorded because disposal date was Jan. 1, 2007. (2) To record disposal: Cash (+A) .......................................................................... 5,750 Accumulated depreciation, machine A ( - XA, +A) ............. 17,600 Loss on disposal of machine (+Loss, - SE) ....................... 650 Machine A ( - A) ........................................................... 24,000

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b. Machine B - December 31, 2007: (1) To record depreciation expense for 2007: Depreciation expense (+E, - SE) ....................................... 1,150 Accumulated depreciation, machine B (+XA, - A) ....... 1,150 (\$16,500 – \$5,000) x 1/10 years = \$1,150. (2) To record disposal: Cash (+A) .......................................................................... 4,000 Note receivable (+A) ......................................................... 5,000 Accumulated depreciation, machine B (\$8,050 + \$1,150) ( - XA, +A) .......................................................................... 9,200 Machine B ( - A) ........................................................... 16,500 Gain on disposal of machine (+Gain, +SE) ................ 1,700 c. Machine C - January 1, 2007: (1) Depreciation expense in 2007 - none recorded because disposal date was Jan. 1, 2007. (2) To record disposal: Accumulated depreciation, machine C ( - XA, +A) ............ 48,000 Loss on disposal of machine (+Loss, - SE) ....................... 11,200 Machine C ( - A) .......................................................... 59,200 Req. 2 Machine A - January 1, 2007: Disposal of a long-lived asset with the price below net book value, resulting in a loss. Machine B - December 31, 2007: Disposal of a long-lived asset with the price above net book value, resulting in a gain. Machine C - January 1, 2007: Disposal of a long-lived asset due to damage, resulting in a loss.
Chapter 9 Recommended problems AP9-1 AP9-7 AP9-8 AP9-9 AP9–1.

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