Chap008 Probs - Chapter 08 - Reporting and Interpreting...

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Chapter 08 - Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles Chapter 08 EXERCISES E8–1. Hasbro, Inc. Excerpts from Balance Sheet (in millions) ASSETS Current Assets Cash and cash equivalents $ 630 Accounts receivable (net of allowance for doubtful accounts, $32) 612 Inventories 300 Prepaid expenses and other current assets 171 Total current assets 1,713 Property, Plant, and Equipment Machinery and equipment 413 Buildings and improvements 196 Land and improvements 7 Property, plant, and equipment (at cost) 616 Less: Accumulated depreciation 403 Total property, plant, and equipment (net) 213 Other Assets Goodwill 474 Other intangibles (net of accumulated amortization, $800) 568 Other noncurrent assets 200 Total other assets 1,242 Total Assets $3,168 8-1
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Chapter 08 - Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles E8–6. Date Assets Liabilities Stockholders’ Equity 1. 2010* Accumulated depreciation –6,000 Depreciation expense –6,000 2a. 2011 Cash –1,000 Repair and maintenance expense –1,000 2b. 2011 Cash Equipment –12,000 +12,000 * Adjusting entry for 2010: ($100,000 cost – $10,000 residual value) x 1/15 = $6,000. E8–7. Req. 1 a. Straight-line: Year Computation Depreciation Expense Accumulated Depreciation Net Book Value At acquisition $10,000 1 ($10,000 - $1,000) x 1/4 $2,250 $2,250 7,750 2 ($10,000 - $1,000) x 1/4 2,250 4,500 5,500 3 ($10,000 - $1,000) x 1/4 2,250 6,750 3,250 4 ($10,000 - $1,000) x 1/4 2,250 9,000 1,000 b. Units-of-production: ($10,000 – $1,000) ÷ 9,000 = $1.00 per hour of output Year Computation Depreciation Expense Accumulated Depreciation Net Book Value At acquisition $10,000 1 $1.00 x 3,600 hours $3,600 $3,600 6,400 2 $1.00 x 2,700 hours 2,700 6,300 3,700 3 $1.00 x 1,800 hours 1,800 8,100 1,900 4 $1.00 x 900 hours 900 9,000 1,000 If the machine is used evenly throughout its life and its efficiency (economic value in use) is expected to decline steadily each period over its life, then straight-line depreciation would be preferable. If the machine is used at different rates over its useful life and its efficiency declines with output, then the units-of-production method would be preferable because it would result in a better matching of depreciation expense with revenue earned. 8-2
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Chapter 08 - Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles E8–11. Req. 1 Depreciation Expense Book Value at End of Method of Depreciation Year 1 Year 2 Year 1 Year 2 Straight-line. .......................... $22,500 $22,500 $73,500 $51,000 Units-of-production. ............... 32,250 33,750 63,750 30,000 Double-declining-balance. ..... 48,000 24,000 48,000 24,000 Computations: Amount to be depreciated: $96,000 – $6,000 = $90,000: Straight-line: $90,000 ÷ 4 years = $22,500 per year Units-of-production: $90,000 ÷ 120,000 units = $.75 per unit Year 1: 43,000 x $.75 = $32,250 Year 2: 45,000 x $.75
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Chap008 Probs - Chapter 08 - Reporting and Interpreting...

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