Chapter7 - (5-10 min.) E 7-15ALand:$175,000 + $190,000 +...

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Unformatted text preview: (5-10 min.) E 7-15ALand:$175,000 + $190,000 + $3,500 + $3,000 + $9,000 = $380,500Land improvements:$55,000 + $14,000 + $8,000 = $77,000Building: $59,000 + $650,000 = $709,000(10-15 min.) E 7-16AAllocation of cost to individual machines:MachineAppraisedValuePercentage of TotalMarket ValueTotalCostCost ofEach Machine1$ 38,250 $38,250 / $170,000 =.225$167,000 .225 = $ 37,575273,100 73,100 / 170,000 =.430167,000 .430 =71,810358,65058,650 / 170,000 =.345167,000 .345 = 57,615Totals$170,0001.000$167,000Sale price of machine No. 2.$73,100Cost.71,810Gain on sale of machine$ 1,290(15 min.) E 7-18AJournalACCOUNT TITLES AND EXPLANATIONDEBITCREDIT1.a.Land487,000487,000Cash...b. Building($1,400 + $15,320 + $690,000 + $28,300)... 735,020Note Payable690,000Cash ($1,400 + $15,320 + $28,300).45,020c.Depreciation Expense2,843Accumulated Depreciation($735,020 $337,000) / 35 3/122,8432.BALANCE SHEETPlant assets:Land...$487,000Building.$735,020Less Accumulated depreciation.(2,843)Building, net.732,1773.INCOME STATEMENTExpense:Depreciation expense...$ 2,843(15-20 min.) E 7-19AYearStraight-LineUnits-of-ProductionDouble-Declining-Balance2010$ 4,050$ 4,950$ 9,50020114,0505,8504,75020124,0502,2501,95020134,0503,150-0-$16,200$16,200$16,200_____Computations:Straight-line: ($19,000 $2,800) 4 = $4,050 per year.Units-of-production: ($19,000 $2,800) 36,000 miles = $.45 per mile;201011,000$.45=$4,950201113,000.45=5,85020125,000.45=2,25020137,000.45=3,150Double-declining-balance Twice the straight-line rate: 1/4 2 = 2/4 = 50%2010$19,000 .50=$9,5002011($19,000 $9,500) .50=$4,7502012$4,750 $2,800 =$4,750 residual value of $2,800 = $1,950The units-of productionmethod tracks the wear and tear on the van most closely.For income tax purposes, the double-declining-balancemethod is best because it provides the most depreciation and, thus, the largest tax deductions in the early life of the asset. The company can invest the tax savings to earn a return on the investment....
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This note was uploaded on 09/16/2011 for the course ACG 2021 taught by Professor Hornik during the Spring '08 term at University of Central Florida.

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Chapter7 - (5-10 min.) E 7-15ALand:$175,000 + $190,000 +...

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