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Accounting 1- Chapter 9 book answers

Accounting 1- Chapter 9 book answers - Chapter 9 Plant...

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Chapter 9 Plant Assets and Intangibles Short Exercises (5 min.) S 9-1 Req. 1 The other costs (back property tax, transfer taxes, removal of a building, and survey fee) are included as part of the cost of the land because they are necessary to get the land ready for its intended use. Req. 2 After the land is ready for use, the related costs (listed above) would be expenses. Chapter 9 Plant Assets and Intangibles 149
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(10 min.) S 9-2 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Land ($140,000 × .50) 70,000 Building ($140,000 × .40) 56,000 Equipment ($140,000 × .10) 14,000 Note Payable 140,000 Estimated Market Value Percent of Total Land ..................... $ 75,000 $75,000 / $150,000 = 50.0% Building ............... 60,000 $60,000 / $150,000 = 40.0% Equipment ........... 15,000 $15,000 / $150,000 = 10.0% Total ..................... $150,000 100.0 % Financial and Managerial Accounting 2/e Solutions Manual 150
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(10 min.) S 9-3 Req. 1 First-year depreciation: a. Straight-line ($65,000,000 $5,000,000) / 4 years……. $15,000,000 b. Units-of-production [($65,000,000 $5,000,000) / 6,000,000 miles] × 1,300,000 miles…… $13,000,000 c. Double-declining-balance ($65,000,000 / 4 years × 2).. $32,500,000 Req. 2 Book value: Straight-Line Cost ............................... …………………. $65,000,000 Less: Accumulated depreciation.…... (15,000,000 ) Book value .................... …………………. $50,000,000 Chapter 9 Plant Assets and Intangibles 151
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(10 min.) S 9-4 Req. 1 Second-year depreciation: a. Straight-line ($59,000,000 $5,000,000) / 5 years... $10,800,000 b. Units-of-production [($59,000,000 $5,000,000) / 6,000,000 miles] × 1,300,000 miles……… 11,700,000 c. Double-declining-balance: Year 1 ($59,000,000 / 5 years × 2) = $23,600,000 Year 2 [($59,000,000 $23,600,000) / 5 × 2] = $14,160,000 Req. 2 The balance in Accumulated Depreciation at the end of the second year is ($10,800,000 x 2) = $21,600,000. Financial and Managerial Accounting 2/e Solutions Manual 152
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(10 min.) S 9-5 Req. 1 The double-declining-balance (DDB) method offers the tax advantage for the first year of an asset’s use. The advantage results from the greater amount of DDB depreciation (versus the other methods). DDB produces the fastest tax deductions and conserves cash that the taxpayer can invest to earn more income. Req. 2 DDB depreciation ..................... ……………………… $32,500,000 Straight-line depreciation ....................... …………... (15,000,000 ) Extra depreciation tax deduction with DDB……… $ 17,500,000 DDB (65,000,000 / 4 x 2) = $32,500,000 S/L (65,000,000 – 5,000,000) / 4 = $15,000,000 (5-10 min.) S 9-6 Partial-year depreciation: Straight-line ($23,100 $1,500) / 3 years × 10/12………… $6,000 Chapter 9 Plant Assets and Intangibles 153
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(10 min.) S 9-7 Req. 1 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Depreciation Expense—Equipment 10,000 Accumulated Depreciation— Equipment 10,000 Depreciation for years 1-4: $50,000 / 10 years = $ 5,000 per year $ 5,000 × 4 years = $20,000 for years 1-4 Asset’s remaining depreciable ÷ (New) Estimated = (New) Annual book value useful life remaining depreciation $50,000 $20,000 ÷ 3 years = $10,000 per year $30,000 Req. 2 The Accumulated Depreciation at the end of year 5 is $30,000. ($20,000 + $10,000) = $30,000 Financial and Managerial Accounting 2/e Solutions Manual 154
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(10 min.) S 9-8 Req. 1 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT 2012 Dec. 31 Cash 43,000 Accumulated Depreciation 27,000 Equipment 58,500 Gain on Sale of Asset 11,500 Accumulated Depreciation (58,500 – 4,500) / 6 x 3 = $27,000.
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