Jennings advertising inc reported the following in

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52. Jennings Advertising Inc. reported the following in its December 31, 2013, balance sheet: In a disclosure note, Jennings indicates that it uses straight-line depreciation over 10 years and estimates salvage value at 10% of cost. What is the average age of the equipment owned by Jennings? A. 2.7 years. B. 3 years. C. 7 years. D. 7.3 years. Annual depreciation is ($500,000 - 50,000) ÷ 10 = $45,000 Accumulated depreciation ÷ Annual depreciation = $135,000 ÷ $45,000 = 3 years AACSB: Analytic AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Learning Objective: 11-02 Determine periodic depreciation using both time-based and activity-based methods. Spiceland - Chapter 11 #52 Topic: Determine periodic depreciation using both time-based and activity-based methods
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53. Gulf Consulting Co. reported the following on its December 31, 2013, balance sheet: Equipment (at cost)…..$700,000 In a disclosure note, Gulf indicates that it uses straight-line depreciation over five years and estimates salvage value as 10% of cost. Gulf's equipment averages 3.5 years at December 31, 2013. What is the book value of Gulf's equipment at December 31, 2013? Annual depreciation is ($700,000 - 70,000) ÷ 5 = $126,000 Depreciation for 3.5 years is $126,000 x 3.5 = $441,000 Book value = $700,000 - 441,000 = $259,000 AACSB: Analytic AICPA FN: Measurement Blooms: Analyze Difficulty: 3 Hard Learning Objective: 11-02 Determine periodic depreciation using both time-based and activity-based methods. Spiceland - Chapter 11 #53 Topic: Determine periodic depreciation using both time-based and activity-based methods
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54. Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method? $16.5 million x [(10 + 9 + 8 + 7 + 6)/55] = $12 million AACSB: Analytic AICPA FN: Measurement Blooms: Apply Difficulty: 3 Hard Learning Objective: 11-02 Determine periodic depreciation using both time-based and activity-based methods. Spiceland - Chapter 11 #54 Topic: Determine periodic depreciation using both time-based and activity-based methods On March 31, 2013, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway construction. The cost of the quarry rights was $164,000, with estimated salable rock of 20,000 tons. During 2013, Belotti loaded and sold 4,000 tons of rock and estimated that 16,000 tons remained at December 31, 2013. At January 1, 2014, Belotti estimated that 20,000 tons still remained. During 2014, Belotti loaded and sold 8,000 tons. Spiceland - Chapter 11
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