8-3-2008 - E9-28 Computing Asset Cost and Depreciation...

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Unformatted text preview: E9-28 Computing Asset Cost and Depreciation Expense1) Purchase price.. $45,000Sales tax $2,000Delivery costs (FOB shipping point). $1,000 Assembly cost $1,400Painting of machine $600Total cost $50,0002) First full years depreciation with straight-line method:$50,000/ 15 years = $3,333E 9-30Accounting for leased asset1. a Jan 1. Lease property.........................................................................$9,413Lease liability .........................................................................$9,413To record the lease agreement on Januaryb. Jan 31. Lease liability........................................................................$122Interest expense.....................................................................$78Cash ......................................................................................$200To record the first lease payment on January 31, 20092.There is no entry on January 1, 2009 because this is a rental lease.Dec 31. Rent expense........................................................................$2001Cash....................................................................................$200To record the monthly rental for copy machineE 9-331.Depreciation expensea.Straight-line2009:2008:b.Units-of-production2008:2009:2.There is no definitive answer to the question of which depreciation method more closely reflects the used-up service potential of the car. If there is no obsolescence factor, then the asset probably would wear out based on use, for which the units-of-production method would appear to be more appropriate. If obsolescence is an important factor in determining the cars useful life, the cars service potential would probably decline on an accelerated basis because obsolescence affects a cars fair market value more when it is newer than when it is older. The decline in service potential would also be affected by the extent to which the maintenance policy assumed in selecting the four-year life is actually followed during the four-year period.E9-37Asset Impairment2Original cost.. 700,000Accumulated depreciation.. 150,000 Book value... 550,000Less the fair value.... Less the fair value....
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8-3-2008 - E9-28 Computing Asset Cost and Depreciation...

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