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Chapter-9BarryBus21

# Charged to the building and land accounts 325000

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Unformatted text preview: ccounts? \$325,000 \$500,000 = 65% Cash Purchase Cedar Fair purchased a new ride for \$26,000,000 less a \$1,000,000 discount. Cedar Fair paid \$125,000 for transportation and \$625,000 for installation of the ride. Prepare the journal entry for the acquisition assuming Cedar Fair paid cash for the new ride. 1 Analyze Record 8 2 Maintenance Costs Incurred during Use Type of Expenditure Identifying Characteristics Accounting Treatment Expense Ordinary 1. Relatively small, recurring expenditures repairs and that maintain normal operating condition maintenance 2. Do not increase productivity 3. Do not extend life beyond original estimate Extraordinary 1. Relatively large, infrequent expenditures repairs, such as major overhauls or replacements replacements, of major components and additions 2. May extend useful life 3. May increase productivity or efficiency Capitalize 9 10 11 Depreciation Expense 2008 Depreciation Includes \$130 for 2008 Book value 2008 12 Depreciation Methods Straight-line Units-of-production Declining balance We will use the following information to illustrate the three methods of depreciation: At the beginning of the year, Cedar Fair purchased a new Go-Cart Ride for \$62,500 cash. The ride has an estimated useful life of 3 years and an estimated residual value of \$2,500. 13 Straight-Line Method (\$62,500 - \$2,500) 1 3 = \$20,000 per year Depreciation Accumulated Expense Depreciation Year (debit) (credit) 1 2 3 \$ 20,000 20,000 20,000 \$ 60,000 \$ 20,000 20,000 20,000 60,000 Accumulated Undepreciated Depreciation Balance (credit balance) (book value) \$ 62,500 \$ 20,000 42,500 40,000 22,500 60,000 2,500 14 \$ Units-of-Production Method The ride has a 100,000-mile estimated useful life. If the ride is used 30,000 miles in the first year, what is the amount of depreciation expense? 30,000 100,000 \$18,000 15 (\$62,500 - \$2,500) = Units-of-Production Method Depreciation Depreciation Expense Expense (debit) \$ 18,000 30,000 12,000 60,000 Accumulated Depreciation (credit balance) Balance \$ 18,000 48,000 60,000 Undepreciated Balance (book value) \$ 62,500 44,500 14,500 2,500 Year 1 2 3 Miles 30,000 50,000 20,000 100,000 \$ 16 Declining-Balance Method What is the amount of of depreciation for each of the first two years? First Year Second Year (\$62,500 - \$0) 2 3 2 3 = = \$41,667 \$13,889 (\$62,50...
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