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# Depreciationfactor b book value depreciation factor

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Unformatted text preview: 00 \$ 0 \$335,000 \$134,000a 335,000 134,000 201,000 80,400 335,000 214,400 120,600 48,240 335,000 262,640 72,360 2,360b 335,000 265,000 70,000 0 335,000 a Depreciation expense = Book value at beginning of the period Depreciation factor b Book value Depreciation factor = \$72,360 40% = \$28,944. If Stockton Corporation depreciated \$28,944 in 2014, the asset's book value would drop below its salvage value. To prevent this from happening, depreciation expense for 2014 can be only \$2,360. c. Depreciation Expense (E, –SE) 134,000 Accumulated Depreciation (–A) Depreciated fixed asset for 2011. 134,000 E9–11 1. Activity Method: Depreciation Expense per Mile = = (\$100,000 – \$20,000) ÷ 200,000 Miles \$0.4/Mile Depreciation Expense (E, –SE) Accumulated Depreciation (–A) Depreciated asset for 2011. Depreciation Expense (E, –SE) Accumulated Depreciation (–A) Depreciated asset for 2012. 14,000 Depreciation Expense (E, –SE) Accumulated Depreciation (–A) Depreciated asset for 2013. 16,000 Depreciation Expense (E, –SE) Accumulated Depreciation (–A) Depreciated asset for 2014. 11 19,200 10,000 19,200 14,000 16,000 10,000 E9–11 Concluded Depreciation Expense (E, –SE) Accumulated Depreciation (–A) Depreciated asset for 2015. 14,000 Depreciation Expense (E, –SE) Accumulated Depreciation (–A) Depreciated asset for 2016. 4,000 14,000 4,000 Cash (+A) 12,000 Accumulated Depreciation (+A) Loss on Sale of Truck (Lo, –SE) Truck (–A) Sold truck. 2. Straight­line Method: Depreciation Expense per Year 77,200 10,800 100,000 = (\$100,000 – \$20,000) ÷ 5 Years = \$16,000/year Depreciation Expense (E, –SE) Accumulated Depreciation (–A) Depreciated asset. Note: 16,000 16,000 This entry would be made each year for five years. No entry would be made in Year 6 since the truck's estimated useful life ended at the end of Year 5, which means that the truck would have been depreciated down to its estimated salvage value. Cash (+A) Accumulated Depreciation (+A) Loss on Sale of Truck (Lo, –SE) Truck (–A) Sold truck. 12,000 80,000 8,000 100,000 E9–12 a. Depletion (E, –SE) Oil Deposits (–A) 1,200,000 Depleted oil deposits. 1,200,000* * \$1,200,000 = (\$4,000,000 ÷ 100,000 barrels) 30,000 barrels extracted b. 12 Depletion (E, –SE) Oil Deposits (–A) 2,000,000 2,000,000* Depleted oil deposits. * \$2,000,000 = (\$4,000,000 ÷ 100,000 barrels) 50,000 barrels extracted c. \$800,000 E9–13 a. Year 2011 2012 2013 2014 Depreciation Expense Per Company's Books \$120,000 0 25,000 0 25,000 0 25,000 Correct Depr. Exp. Annual Difference Cumulative Difference \$25,000 \$95,000 \$95,000 (25,000)70,000 (25,000)45,000 (25,000)20,000 b. After adjusting entries are prepared and posted on December 31, 2013, Accumulated Depreciation will be understated by \$45,000. c. After adjusting entries, but before closing entries have been prepared and posted on December 31, 2013, Retained Earnings will be understated by \$70,000. d. After both adjusting and closing entries have been prepared and posted on December 31, 2013, Retained Earnings will be understated by \$45,000. E9–14 a. b. 13 Cash (+A) 235,000 Accumulated Depreciation—Office Equipment (+A) Office Equipment (–A) Gain on Sale of Fixed Assets (Ga, +SE) Sold office equipment. Cash (+A) 185,000 Accumulated Depreciation—Office Equipment (+A) Loss on Sale of Fixed Assets (Lo, –SE) Office Equipment (–A) Sold office equipment. 300,000 500,000 35,000 300,000 15,000 500,000 14 E9–15 Assuming that Paris Company kept the equipment for its entire five­year estimated useful life, the depreciation schedule on the equipment would be as follows. D a te Depreciation Factor Depreciation Expense Cost Accumulated Depreciation Book Value 1/1/09 \$25,000 \$ 0 \$25,000 12/31/09 40% \$10,000 25,000 10,000 15,000 12/31/10 40% 6,000 25,000 16,000 9,000 12/31/11 40% 3,600 25,000 19,600 5,400 12/31/12 40% 400* 25,000 20,000 5,000 12/31/13 40% 0 25,000 20,000 5,000 __________________ * Because the equipment's book value cannot drop below its estimated salvage value, depreciation expense for 2012 cannot exceed \$400. a. b. c. d. 15 Accumulated Depreciation—Equipment (+A) Loss on Disposal of Equipment (Lo, –SE) Equipment (–A) Disposed of equipment. Accumulated Depreciation—Equipment (+A) Loss on Disposal of Equipment (Lo, –SE) Equipment (­A) Disposed of equipment. Cash (+A) 8,000 Accumulated Depreciation—Equipment (+A) Equipment (–A) Gain on Sale of Fixed Assets (Ga, +SE) Sold equipment. 19,600 5,400 25,000 20,000 5,000 25,000 19,600 25,000 Fixed Asset (new) (+A) 30,000 Accumulated Depreciation—Equipment (+A) 20,000 Loss on Disposal of Fixed Asset (Lo, –SE) 3,000 Cash (–A) 28,000 Equipment (old) (–A) 25,000 Exchanged fixed assets. 2,600 E9–16 a. and b. First, let us compute the original cost of the equipment that was sold in 2011 as follows: Equipment at the End of 2010 + \$32,700 Equipment Purchased during 2011 – Equipment sold during 2011 + \$12,000 X – = = X \$7,200 Equipment at the End of 2011 = \$37,500 Now, let us compute the rela...
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