Week 5 - ACC205 Principles of Accounting I - ACC205:...

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ACC205: Principles of Accounting IRequired TextHorngren, C., Harrison W. &Oliver, M. (2012). Accounting (9th ed.). Upper Saddle River, NJ: Pearson Prentice Hall. ISBN: 9780132569057Week 5Required Readings1. Chapter 9: Plant Assets and Intangibles2. Chapter 10: Current Liabilities and PayrollAssignmentsa. Chapter 9,P9-28Ab. Chapter 9,E9-21c. Chapter 9,E9-24d. Chapter 10, P10-15Ae. Chapter 10, P10-18AP9-28ACapitalized asset cost and first year depreciation, and identifying depreciation results that meetmanagement objectives [30–40 min]On January 3, 2012, Trusty Delivery Service purchased a truck at a cost of $90,000. Before placing the truck in service, Trustyspent $3,000 painting it, $1,500 replacing tires, and $4,500 overhauling the engine. The truck should remain in service for fiveyears and have a residual value of $9,000. The truck's annual mileage is expected to be 22,500 miles in each of the first four yearsand 10,000 miles in the fifth year—100,000 miles in total. In deciding which depreciation method to use, Mikail Johnson, the
general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, anddouble-declining-balance).Requirements1.Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulateddepreciation, and asset book value.2.Trusty prepares financial statements using the depreciation method that reports the highest net income in the early yearsof asset use. For income tax purposes, the company uses the depreciation method that minimizes income taxes in the early years.Consider the first year that Trusty uses the truck. Identify the depreciation methods that meet the general manager's objectives,assuming the income tax authorities permit the use of any of the methods.(30-40 min.)P 9-28AReq. 1Straight-Line Depreciation ScheduleDepreciation for the YearDateAssetCostDepreciableCost×DepreciationRate=DepreciationExpenseAccumulatedDepreciationBookValue1-03-2012$99,000$99,00012-31-2012$90,000 x1/5 x 12/12 =$18,000$18,00081,00012-31-201390,000 x1/5 x 12/12 =18,00036,00063,000
12-31-201490,000 x1/5 x 12/12 =18,00054,00045,00012-31-201590,000 x1/5 x 12/12 =18,00072,00027,00012-31-201690,000 x1/5 x 12/12 =18,00090,000RV=9,000__________Asset Cost: $90,000 + $3,000 + $1,500 + $4,500 = $99,000Depreciable Cost:$99,000 - $9,000 = $90,000
(continued)P 9-28AReq. 1Units-of-Production Depreciation ScheduleDepreciation for the YearDateAsset CostDepreciation PerUnit×Number of Units=DepreciationExpenseAccumulatedDepreciationBook Value1-03-2012$99,000$99,00012-31-2012$0.90×22,500 =$20,250$20,25078,75012-31-20130.90×22,500 =20,25040,50058,50012-31-20140.90×22,500 =20,25060,75038,25012-31-20150.90×22,500 =20,25081,00018,00012-31-20160.90×10,000 =9,00090,0009,000
100,000 miles__________Depreciation per unit (mile): ($99,000

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Term
Spring
Professor
Telado

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