Homework Assignment - Week 5

# Depreciation expense cost salvage value useful life

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Depreciation Expense = (Cost - Salvage Value) / Useful Life Depreciation Expense = (\$96,000 - \$12,000) / 6 = \$14,000 Accumulated Depreciation at December 31, 2011 = Depreciation Expense x 4 years = Accumulated Depreciation = 14,000 x 4 years = \$56,000 Machine 2 - Declining-balance Depreciation Rate (annually) = 1 year / 5 years = .2 = 20% Depreciation Rate for Declining-balance = 20% x 2 = 40% Dep. Expense Book Value 2009 (.5 yr) 85000 x 40% x 1/2 = 17000 68000 2010 68000 x 40% = 27200 23800 2011 23800 x 40% = 9520 14280 Accumulated Depreciation at 12/31/11 = \$53,720 Machine 3 - Units-of-activity Cost per hour = 66000 / 24000 = \$2.75 Machine Hours 2009 400 x \$2.75 \$1,100 2010 4500 x \$2.75 \$12,375 2011 5000 x \$2.75 \$1,375 Acc Dep at 12/31/11 \$14,850 Dep. Expense Book Value 2009 (.25 yr) 85000 x 40% x 1/4 = 8500 76500 2010 76500 x 40% = 30600 45900 (b) If machine 2 was purchased on October 1 instead of July 1, what would be the depreciation expense for this machine in 2009? 2010?

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GENERAL JOURNAL Date Account Titles and Explanations Debit Credit 2009 (a) Oct 1 Cash 700,000 Bonds Payable 700,000 (b) Dec 31 Bonds Interest Expense 12,250 Bond Interest Payable 12,250 (700,000 x 7% x 3/12) 2010 (d) Oct 1 Bond Interest Payable 12,250 Bond Interest Expense 36,750 Cash 49,000 (e) Dec 31 Bond Interest Expense 12,250 Bond Interest Payable 12,250 2011 (f) Jan 1 Bond Interest Payable 12,250 Cash 12,250 Bonds Payable 700,000 Loss on Bond Redemption 14,000 Cash (700,000 x 1.02) 714,000 (c ) Current Liabilities Bonds Interest Payable 12250 Long-Term Liabilities 700000
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