8 extra practice fa what if 1 co purchased equipment

This preview shows page 8 - 12 out of 15 pages.

We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Concepts of Database Management
The document you are viewing contains questions related to this textbook.
Chapter 5 / Exercise 5-5
Concepts of Database Management
Last/Pratt
Expert Verified
8Extra Practice(FA) What if? #1Co. purchased equipment for $710,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been entered for 7 years on a straight-line basis. In 2015, it is determined that the total estimated life should be 15 years with a salvage value of $4,000 at the end of that time.Instructions(c) Prepare the entry (if any) to correct the prior years’ depreciation.(d) Prepare the entry to record depreciation for 2015.Answer(FA) What if? #1a.No entry necessary. Changes in estimates are treated prospectively.b.Depreciation Expense........................................27,000*...........Accumulated Depreciation—Equipment27,000*Original cost$710,000Accumulated depreciation    [($710,000 – $10,000) ÷ 10] X 7  (490,000)Book value (1/1/11)  220,000Estimated salvage value         (4,000)Remaining depreciable basis  216,000Remaining useful life    (15 years – 7 years)÷                 8Depreciation expense—2014$  27,0008
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Concepts of Database Management
The document you are viewing contains questions related to this textbook.
Chapter 5 / Exercise 5-5
Concepts of Database Management
Last/Pratt
Expert Verified
9(FA c) What if? #2Change in Depreciation methods (From Straight line to Sum of the Years’ digits)Cost of equipment is $710,000Estimated useful life is $ 10 yearsEstimated salvage value is $10,000At the beginning of Year 8 (i.e. after depreciating the equipment for 7 years), the company changes from straight line to the sum of the years’ digits method of depreciation There is no change made to the estimated salvage value or useful lifeInstructions:1.How should the change from straight line to sum of the years’ digits method be reported?2.Calculate depreciation expense for years 8, 9 and 109
10(FA) What if? #2Answer: 1.Account for the change in depreciation methodsprospectively2.Book value, beg year 8 (using straight line)Cost – AD710,000-(70000*7)710000-490,000=220000Estimated salvage value (no change 10,000Depreciable cost: BV –Est SV = 220,000-10,000=210,000Application of Sum of the years digits10 years – 7 years = 3 years of depreciationSOYD: 3+2+1 = 6 = denominatorYearly depreciation: Year 8-10 under sum of years’ digitsYear 8 (220,000-10,000) (3/6)105,000Year 9(220,000-10,000) (2/6)70,000Year 10(220,000-10,000) (1/6)35,00010
11Ch 22 Part 2Error Corrections

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture