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Assign_6_-_Solutions_to_Practice_Problem

Ex 922 1 fixed assets should be reported at cost and

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Ex. 9–22 1. Fixed assets should be reported at cost and not replacement cost. 2. Land does not depreciate. 3. Patents and goodwill are intangible assets that should be listed in a separate section following the Fixed Assets section. Patents should be reported at their net book values (cost less amortization to date). Goodwill should not be amortized, but should be only written down upon impairment.
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Prob. 9–2A 1. Depreciation Expense a. Straight- b. Units-of- c. Double- Line Production Declining-Balance Year Method Method Method 2010 $31,250 $35,625 $67,500 2011 31,250 31,500 22,500 2012 31,250 26,625 3,750 Total $93,750 $93,750 $93,750 Calculations: Straight-line method: ($101,250 – $7,500)/3 = $31,250 each year Units-of-production method: ($101,250 – $7,500)/25,000 hours = $3.75 per hour 2010: 9,500 hours @ $3.75 = $35,625 2011: 8,400 hours @ $3.75 = $31,500 2012: 7,100 hours @ $3.75 = $26,625 Double-declining-balance method: 2010: $101,250 × 2/3 = $67,500 2011: ($101,250 – $67,500) × 2/3 = $22,500 2012: ($101,250 – $67,500 – $22,500 – $7,500*) = $3,750 *Book value should not be reduced below the residual value of $7,500. 2. The double-declining-balance method yields the most depreciation expense in 2010 of $67,500. 3. All three depreciation methods yield the same total depreciation over the three-year life of the equipment of $93,750, which is the cost of the equipment of $101,250 less the residual value of $7,500.
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Prob. 9–3A a. Straight-line method: 2010: [($135,000 – $6,000)/3] × 1/2 ............................................. $21,500 2011: ($135,000 – $6,000)/3 ........................................................ 43,000 2012: ($135,000 – $6,000)/3 ........................................................ 43,000 2013: [($135,000 – $6,000)/3] × 1/2 ............................................. 21,500 b. Units-of-production method: 2010: 1,500 hours @ $10.75* ....................................................... $16,125 2011: 3,500 hours @ $10.75 ........................................................ 37,625 2012: 5,000 hours @ $10.75 ........................................................ 53,750 2013: 2,000 hours @ $10.75 ........................................................ 21,500 *($135,000 – $6,000)/12,000 hours = $10.75 per hour c. Double-declining-balance method: 2010: $135,000 × 2/3 × 1/2 ........................................................... $45,000 2011: ($135,000 – $45,000) × 2/3 ................................................ 60,000 2012: ($135,000 – $45,000 – $60,000) × 2/3 ............................... 20,000 2013: ($135,000 – $45,000 – $60,000 – $20,000 – $6,000*) ....... 4,000 *Book value should not be reduced below $6,000, the residual value.
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