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Title: Accounting chapter 10 ( Depreciation) Answers
Description: chapter 10 ( Depreciation) Answers
Description: chapter 10 ( Depreciation) Answers
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CHAPTER 10
Plant Assets, Natural Resources,
and Intangible Assets
ASSIGNMENT CLASSIFICATION TABLE
Study Objectives
Questions
Brief
Exercises
Do It!
Exercises
A
Problems
B
Problems
1, 2
1
1, 2, 3
1A
1B
2
4
1
...
1, 2, 3
2
...
4, 5
3
...
6, 7, 21,
22, 23
3, 4, 5, 6
6
5, 6, 7
2A, 3A,
4A, 5A
2B, 3B,
4B, 5B
4
...
8
7
7, 8
8
4A
4B
5
...
9, 24
8
6
...
10, 11
9, 10
9, 10
5A, 6A
5B, 6B
7
...
12, 13
11
11
8
...
14, 15, 16,
17, 18, 19
12
12, 13
7A, 8A
7B, 8B
9
...
20, 25
13, 14
14
5A, 7A,
9A
5B, 7B, 9B
Explain how to account
for the exchange of plant
assets
...
Copyright © 2009 John Wiley & Sons, Inc
...
)
1A
Determine acquisition costs of land and building
...
Simple
30–40
3A
Compute depreciation under different methods
...
Moderate
20–30
5A
Journalize a series of equipment transactions related to
purchase, sale, retirement, and depreciation
...
Simple
30–40
7A
Prepare entries to record transactions related to acquisition
and amortization of intangibles; prepare the intangible
assets section
...
Moderate
30–40
9A
Calculate and comment on asset turnover ratio
...
Simple
20–30
2B
Compute depreciation under different methods
...
Moderate
30–40
4B
Calculate revisions to depreciation expense
...
Moderate
40–50
6B
Record disposals
...
Moderate
30–40
8B
Prepare entries to correct errors made in recording and
amortizing intangible assets
...
Moderate
5–10
10-2
Copyright © 2009 John Wiley & Sons, Inc
...
)
BE1
1
AP
Simple
2–4
BE2
1
AP
Simple
1–2
BE3
3
AP
Simple
2–4
BE4
3
E
Moderate
4–6
BE5
3
AP
Simple
4–6
BE6
3
AP
Simple
2–4
BE7
4
AN
Moderate
4–6
BE8
5
AP
Simple
2–4
BE9
6
AP
Simple
4–6
BE10
6
AP
Simple
4–6
BE11
7
AP
Simple
4–6
BE12
8
AP
Simple
2–4
BE13
9
AP
Simple
4–6
BE14
9
AP
Simple
2–4
BE15
10
AP
Simple
4–6
BE16
10
AP
Simple
4–6
DI1
1
C
Simple
4–6
DI2
2
AP
Simple
2–4
DI3
6
AP
Simple
6–8
DI4
7, 8
K
Simple
2–4
EX1
1
C
Simple
6–8
EX2
1
AP
Simple
4–6
EX3
1
AP
Simple
4–6
EX4
2
C
Simple
4–6
EX5
3
AP
Simple
6–8
EX6
3
AP
Simple
8–10
EX7
3
AP
Simple
10–12
EX8
4
AN
Moderate
8–10
Copyright © 2009 John Wiley & Sons, Inc
...
)
EX9
6
AP
Moderate
8–10
EX10
6
AP
Moderate
10–12
EX11
7
AP
Simple
6–8
EX12
8
AP
Simple
4–6
EX13
8
AP
Simple
8–10
EX14
9
AP
Simple
2–4
EX15
10
AP
Moderate
8–10
EX16
10
AP
Moderate
8–10
P1A
1
C
Simple
20–30
P2A
3
AP
Simple
30–40
P3A
3
AN
Moderate
30–40
P4A
3, 4
AP
Moderate
20–30
P5A
3, 6, 9
AP
Moderate
40–50
P6A
6
AP
Simple
30–40
P7A
8, 9
AP
Moderate
30–40
P8A
8
AP
Moderate
30–40
P9A
9
AN
Moderate
5–10
P1B
1
C
Simple
20–30
P2B
3
AP
Simple
30–40
P3B
3
AN
Moderate
30–40
P4B
3, 4
AP
Moderate
20–30
P5B
3, 6, 9
AP
Moderate
40–50
P6B
6
AP
Simple
30–40
P7B
8, 9
AP
Moderate
30–40
P8B
8
AP
Moderate
30–40
P9B
9
AN
Moderate
5–10
BYP1
3, 8
AN
Simple
15–20
BYP2
9
AN, E
Simple
10–15
BYP3
2, 3
C
Simple
10–15
BYP4
3
AP, E
Moderate
20–25
BYP5
3
C
Simple
5–10
BYP6
4
E
Simple
10–15
BYP7
8
E
Simple
5–10
10-4
Copyright © 2009 John Wiley & Sons, Inc
...
Q10-9
Q10-24
Q10-11
Q10-13
Q10-14
Q10-15
Q10-16
Q10-10
Q10-12
DI10-4
5
...
6
...
7
...
8
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
Broadening Your Perspective
*10
...
Q10-26
E10-6
E10-7
P10-2A
P10-4A
BE10-15
BE10-16
E10-15
E10-16
Q10-20 E10-14 P10-5B P10-9A
BE10-13 P10-5A P10-7B P10-9B
BE10-14 P10-7A
Q10-17 BE10-12 P10-7A P10-8B
Q10-19 E10-12 P10-8A
DI10-4 E10-13 P10-7B
BE10-11
E10-11
BE10-7
E10-8
P10-5A P10-3A
P10-2B P10-3B
P10-4B
P10-5B
BE10-9 E10-9 P10-6A
BE10-10 E10-10 P10-5B
DI10-3 P10-5A P10-6B
BE10-8
P10-4A
P10-4B
Q10-23 BE10-3
BE10-5
BE10-6
E10-5
DI10-2
Analysis
Exploring the Web Decision Making Across Financial Reporting
Communication
the Organization
Comp
...
Describe the procedure for
revising periodic depreciation
...
Indicate how plant assets, natural Q10-25
resources, and intangible assets
are reported
...
Compute periodic depreciation
using different methods
...
Explain the concept of
depreciation
...
Describe how the cost principle
applies to plant assets
...
Analysis
Decision Making
Across the
Organization
Ethics Case
All About You
BE10-4
Evaluation
Correlation Chart between Bloom’s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems
BLOOM’S TAXONOMY TABLE
(For Instructor Use Only)
10-5
ANSWERS TO QUESTIONS
1
...
2
...
3
...
(b) When both the land and building are to be used, necessary costs of the building include
remodeling expenditures and the cost of replacing or repairing the roofs, floors, wiring, and
plumbing
...
You should explain to the president that depreciation is a process of allocating the cost of a plant
asset to expense over its service (useful) life in a rational and systematic manner
...
5
...
(b) Salvage value is used in determining depreciation in each of the methods except the decliningbalance method
...
(a) Useful life is expressed in years under the straight-line method and in units of activity under
the units-of-activity method
...
7
...
8
...
The rationale
is that continual restatement of prior periods would adversely affect confidence in the financial
statements
...
Revenue expenditures are ordinary repairs made to maintain the operating efficiency and productive
life of the asset
...
Revenue expenditures are recognized
as expenses when incurred; capital expenditures are generally debited to the plant asset affected
...
In a sale of plant assets, the book value of the asset is compared to the proceeds received from the
sale
...
If
the proceeds of the sale are less than the book value of the plant asset sold, a loss on disposal occurs
...
The plant asset and its accumulated depreciation should continue to be reported on the balance
sheet without further depreciation adjustment until the asset is retired
...
However, once an asset is fully depreciated, even if it is still being
used, no additional depreciation should be taken
...
10-6
Copyright © 2009 John Wiley & Sons, Inc
...
Natural resources consist of underground deposits of oil, gas, and minerals, and standing timber
...
13
...
It is computed by multiplying the depletion cost per unit by
the number of units extracted and sold
...
The terms depreciation, depletion, and amortization are all concerned with allocating the cost of
an asset to expense over the periods benefited
...
15
...
The cost of an intangible asset should be amortized over that asset’s
useful life (the period of time when operations are benefited by use of the asset)
...
16
...
17
...
Goodwill can be identified only with the business as a whole and, unlike other assets, cannot be
sold separately
...
And, if goodwill appears
on the balance sheet, it means the company has purchased another company for more than the
fair market value of its net assets
...
Goodwill is recorded only when there is a transaction that involves the purchase of an entire
business
...
The recognition of goodwill without an exchange transaction would lead to
subjective valuations which would reduce the reliability of financial statements
...
Research and development costs present several accounting problems
...
As a result, the FASB requires that research and development costs be
recorded as an expense when incurred
...
McDonald’s asset turnover ratio is computed as follows:
Net sales
Average total assets
21
...
5 billion
=
...
9 billion
Since Resco uses the straight-line depreciation method, its depreciation expense will be lower in
the early years of an asset’s useful life as compared to using an accelerated method
...
Resco’s net income will be higher than Yapan’s in the first few years of
the asset’s useful life
...
Copyright © 2009 John Wiley & Sons, Inc
...
Yes, the tax regulations of the IRS allow a company to use a different depreciation method on the
tax return than is used in preparing financial statements
...
23
...
is spreading the plant asset’s cost over a
longer period of time
...
Won’s choice of a shorter estimated useful life will result in higher depreciation expense
reported in each period and lower net income
...
Expensing these costs will make current period income lower but future period income higher because
there will be no additional depreciation expense in future periods
...
25
...
Buildings and improvements
...
Construction in progress
...
$
864
4,577
14,471
1,984
(10,668)
$ 11,228
26
...
27
...
If the fair market value of the old machine is less than its book
value, Tatum should recognize a loss equal to the difference between the two amounts
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 10-1
All of the expenditures should be included in the cost of the land
...
BRIEF EXERCISE 10-2
The cost of the truck is $31,900 (cash price $30,000 + sales tax $1,500 + painting
and lettering $400)
...
BRIEF EXERCISE 10-3
Depreciable cost of $36,000, or ($42,000 – $6,000)
...
Under the straight-line method,
depreciation is the same each year
...
BRIEF EXERCISE 10-4
It is likely that management requested this accounting treatment to boost
reported net income
...
This practice is
20 years
not ethical because management is knowingly misstating asset values
...
The computations are:
Book Value
Year 1
Year 2
$42,000
($42,000 – $21,000)
Copyright © 2009 John Wiley & Sons, Inc
...
22
Year 1
30,000 miles X $
...
22 = $4,400
BRIEF EXERCISE 10-7
Book value, 1/1/10
...
Depreciable cost
...
Revised annual depreciation ($18,000 ÷ 4)
...
2
...
Cash
...
Cash
...
Delivery Equipment
...
Loss on Disposal
...
39,000
2,000
10-10
Copyright © 2009 John Wiley & Sons, Inc
...
Accumulated Depreciation—Office
Equipment
...
Accumulated Depreciation—Office Equipment
...
Office Equipment
...
20 depletion cost
per ton
$
...
Accumulated Depletion
...
Less: Accumulated depletion
...
1,200,000
Weygandt, Accounting Principles, 9/e, Solutions Manual
$5,800,000
(For Instructor Use Only)
10-11
BRIEF EXERCISE 10-12
(a) Amortization Expense—Patent ($120,000 ÷ 10)
...
12,000
12,000
(b) Intangible Assets
Patents
...
Less: Accumulated depletion
...
Less: Accumulated depreciation
...
Intangible assets
Goodwill
...
3 + $44
...
5 ÷
= 1
...
Accumulated Depreciation—Delivery Equipment
...
Delivery Equipment (old)
...
10-12
Copyright © 2009 John Wiley & Sons, Inc
...
Accumulated Depreciation—Delivery Equipment
...
Delivery Equipment (old)
...
Fair market value of old delivery
equipment
Cash paid
Cost of new delivery equipment
Fair market value of old delivery
equipment
Book value of old delivery
equipment ($61,000 – $30,000)
Gain on disposal
Copyright © 2009 John Wiley & Sons, Inc
...
Installation of special shelving
...
Sales tax
...
$24,000
1,100
900
1,300
$27,300
Thus, the cost of the truck is $27,300
...
DO IT! 10-2
Depreciation expense = Cost – Salvage = $15,000 – $1,000 = $1,750
Useful life
8 years
The entry to record the first year’s depreciation would be:
Depreciation Expense
...
(To record annual depreciation on mower)
1,750
1,750
DO IT! 10-3
(a) Sale of truck for cash at a gain:
Cash
...
Truck
...
10-14
Copyright © 2009 John Wiley & Sons, Inc
...
Loss on Disposal
...
Truck
...
2
...
4
...
Intangible assets
Amortization
Franchise
Research and development costs
Goodwill
Copyright © 2009 John Wiley & Sons, Inc
...
For example, the cost of factory machinery includes the
purchase price, freight costs paid by the purchaser, insurance costs
during transit, and installation costs
...
2
...
4
...
6
...
8
...
2
...
4
...
6
...
8
...
10-16
Factory Machinery
Truck
Factory Machinery
Land
Prepaid Insurance
Land Improvements
Land Improvements
Land
Building
Copyright © 2009 John Wiley & Sons, Inc
...
Net cost of removing warehouse
($8,600 – $1,700)
...
Real estate broker’s fee
...
$80,000
6,900
1,100
5,000
$93,000
(b) The architect’s fee ($7,800) should be debited to the Building account
...
EXERCISE 10-4
1
...
Depreciation is a process of cost allocation, not asset valuation
...
True
...
False
...
4
...
Depreciation applies to three classes of plant assets: land improvements, buildings, and equipment
...
False
...
6
...
7
...
Recognizing depreciation on an asset does not result in an accumulation of cash for replacement of the asset
...
True
...
False
...
10
...
Three factors affect the computation of depreciation: cost, useful
life, and salvage value (also called residual value)
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
10-17
EXERCISE 10-5
(a) Depreciation cost per unit is $1
...
(b)
Computation
Year
2010
2011
2012
2013
End of Year
Annual
Units of Depreciation Depreciation
Activity X Cost /Unit = Expense
26,000
$1
...
60
51,200
25,000
1
...
60
27,200
Accumulated
Book
Depreciation
Value
$ 41,600
$126,400
92,800
75,200
132,800
35,200
160,000
8,000
EXERCISE 10-6
(a) Straight-line method:
$120,000 – $12,000
= $21,600 per year
...
(b) Units-of-activity method:
$120,000 – $12,000
= $10
...
10,000
2010 depreciation = 1,700 hours X $10
...
(c) Declining-balance method:
2010 depreciation = $120,000 X 40% X 3/12 = $12,000
...
2011 depreciation = $108,000 X 40% = $43,200
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
EXERCISE 10-7
(a) (1)
2010: ($30,000 – $2,000)/8 = $3,500
2011: ($30,000 – $2,000)/8 = $3,500
(2)
($30,000 – $2,000)/100,000 = $0
...
28 = $4,200
2011: 12,000 X $0
...
Accumulated Depreciation—Delivery Truck
...
Less: Accumulated Depreciation
...
31
Building
$686,000
37,000
$649,000
Warehouse
$75,000
3,600
$71,400
44
15
$ 14,750
$ 4,760
Depreciation Expense—Building
...
Copyright © 2009 John Wiley & Sons, Inc
...
1
June 30
30
Dec
...
Machinery
...
Accumulated Depreciation—Computer
($40,000 X 1/5 X 6/12)
...
Accumulated Depreciation—Computer
($40,000 X 3/5 = $24,000; $24,000 + $4,000)
...
Computer
...
Accumulated Depreciation—Truck
[($39,000 – $3,000) X 1/6]
...
Accumulated Depreciation—Truck
[($39,000 – $3,000) X 5/6]
...
9,000
62,000
4,000
28,000
2,000
40,000
6,000
30,000
39,000
EXERCISE 10-10
(a)
(b)
Cash
...
Equipment
...
27,000
Depreciation Expense
[($50,000 – $5,000) X 1/5 X 4/12]
...
3,000
Cash
...
Equipment
...
10-20
Copyright © 2009 John Wiley & Sons, Inc
...
Accumulated Depreciation—Equipment
...
Equipment
...
Accumulated Depreciation—Equipment
...
Accumulated Depreciation—Equipment
($27,000 + $6,750)
...
Equipment
...
31
Depletion Expense
...
90)
...
90
(b) The costs pertaining to the unsold units are reported in current assets as
part of inventory (20,000 X $
...
EXERCISE 10-12
Dec
...
Patents ($90,000 ÷ 5 X 8/12)
...
Copyright © 2009 John Wiley & Sons, Inc
...
Cash
...
Cash
...
Cash
...
Cash
...
Amortization Expense—Franchise
[($440,000 ÷ 10) X 1/2]
...
Franchise
...
Goodwill = $360,000
Franchise = $418,000 ($440,000 – $22,000)
...
5 times
$1,400,000
Copyright © 2009 John Wiley & Sons, Inc
...
Accumulated Depreciation—Trucks (old)
...
Trucks (old)
...
Cost of old trucks
Less: Accumulated depreciation
Book value
Fair market value of old trucks
Loss on disposal
64,000
17,000
$64,000
22,000
42,000
36,000
$ 6,000
Fair market value of old trucks
Cash paid
Cost of new trucks
53,000
22,000
6,000
$36,000
17,000
$53,000
(b) Machine (new)
...
Gain on Disposal
...
Cash
...
12,000
4,000
1,000
12,000
3,000
$12,000
4,000
8,000
9,000
$ 1,000
$ 9,000
3,000
$12,000
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
10-23
*EXERCISE 10-16
(a) Delivery Truck (new)
...
Accumulated Depreciation—Delivery
Truck (old)
...
Cost of old truck
Less: Accumulated depreciation
Book value
Fair market value of old truck
Loss on disposal
4,000
3,000
15,000
22,000
$22,000
15,000
7,000
4,000
$ 3,000
(b) Delivery Truck (new)
...
Delivery Truck (old)
...
Cost of old truck
Less: Accumulated depreciation
Book value
Fair market value of old truck
Gain on Disposal
8,000
10,000
2,000
$10,000
8,000
2,000
4,000
$ 2,000
Cost of new delivery truck*
4,000
$ 4,000
*Fair value of old truck
10-24
Copyright © 2009 John Wiley & Sons, Inc
...
$745,000
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
10-25
PROBLEM 10-2A
(a)
Year
Computation
Accumulated
Depreciation
12/31
2008
2009
2010
BUS 1
$ 90,000 X 20% = $18,000
$ 90,000 X 20% = $18,000
$ 90,000 X 20% = $18,000
$ 18,000
36,000
54,000
2008
2009
2010
BUS 2
$120,000 X 50% = $60,000
$ 60,000 X 50% = $30,000
$ 30,000 X 50% = $15,000
$ 60,000
90,000
105,000
2009
2010
BUS 3
24,000 miles X $
...
60* = $20,400
$ 14,400
34,800
*$72,000 ÷ 120,000 miles = $
...
(b)
Year
Computation
Expense
(1)
2008
BUS 2
$120,000 X 50% X 9/12 = $45,000
$45,000
(2)
2009
$75,000 X 50% = $37,500
$37,500
10-26
Copyright © 2009 John Wiley & Sons, Inc
...
Sales tax
...
Insurance during shipping
...
Total cost of machine
...
Cash
...
Less: Salvage value
...
Years of useful life
...
Depreciation Expense
...
DDB
Rate
*50%*
*50%*
*50%*
*50%*
$ 40,000
5,000
$ 35,000
÷
5
$ 7,000
7,000
7,000
(b) (1) Recorded cost
...
Depreciable cost
...
Annual depreciation
...
Copyright © 2009 John Wiley & Sons, Inc
...
20 per unit
...
20 X 45,000 = $54,000
2011: 1
...
20 X 25,000 = 30,000
2013: 1
...
In the fourth year, the straight-line method reports the highest amount of
depreciation expense while the declining-balance method reports the
lowest
...
If the straight-line
method is used, the same amount of depreciation expense is recognized
each year
...
The amount of depreciation expense recognized using the units-of-activity
method is dependent on production, so this method could recognize more
or less depreciation expense than the other two methods in any year
depending on output
...
10-28
Copyright © 2009 John Wiley & Sons, Inc
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
10-29
PROBLEM 10-5A
(a) Apr
...
Cash
...
Accumulated Depreciation—
Equipment
($780,000 X 1/10 X 4/12)
...
Accumulated Depreciation—
Equipment
...
Gain on Disposal
...
depreciation—
equipment
338,000
[($780,000 X 1/10 X 4) +
$26,000]
Book value
442,000
Cash proceeds
450,000
Gain on disposal
$ 8,000
June 1
July 1
Dec
...
Land
...
1,500,000
Equipment
...
2,000,000
Depreciation Expense
...
50,000
Accumulated Depreciation—
Equipment
...
Copyright © 2009 John Wiley & Sons, Inc
...
depreciation—
equipment
500,000
($500,000 X 1/10 X 10)
Book value
$
0
(b) Dec
...
Accumulated Depreciation—
Buildings
...
Accumulated Depreciation—
Equipment
...
Buildings
...
Equipment
...
Total plant assets
...
Copyright © 2009 John Wiley & Sons, Inc
...
Apr
...
Land
4,000,000 June 1
2,130,000
5,730,000
400,000
Buildings
28,500,000
28,500,000
Bal
...
Accumulated Depreciation—Buildings
Bal
...
31 adj
...
12,670,000
Bal
...
Equipment
48,000,000 May 1
2,000,000 Dec
...
5,000,000
Dec
...
31
50,000
Dec
...
4,772,000
Bal
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
PROBLEM 10-6A
(a) Accumulated Depreciation—Office
Furniture
...
Office Furniture
...
Accumulated Depreciation—Office
Furniture
...
Office Furniture
...
Accumulated Depreciation—Office
Furniture
...
Office Furniture
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
50,000
25,000
75,000
21,000
50,000
4,000
75,000
31,000
50,000
6,000
75,000
(For Instructor Use Only)
10-33
PROBLEM 10-7A
(a) Jan
...
–
June
45,000
45,000
Research and Development
Expense
...
Sept
...
Patents
...
1
(b) Dec
...
Cash
...
100,000
Cash
...
Patents
...
Franchise
...
Franchise ($148,000 cost – $24,500 amortization) (2)
...
5,300
$ 96,000
123,500
$219,500
(1) Cost ($70,000 + $45,000); amortization ($7,000 + $12,000)
...
10-34
Copyright © 2009 John Wiley & Sons, Inc
...
136,000
Patents
...
2
...
Patents
...
Amortization Expense—Goodwill
...
Copyright © 2009 John Wiley & Sons, Inc
...
48 times
$2,500,000
$1,080,000
=
...
Its asset turnover ratio is almost 13% higher than Lebo’s
ratio
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
PROBLEM 10-1B
Item
1
2
3
4
5
6
7
8
9
10
Land
($
Building
Other Accounts
5,000)
$ 7,500
Property Taxes Expense
$500,000
19,000
100,000
18,000
Land Improvements
6,000
Land Improvements
9,000
( 17,000)
( (3,500)
($118,500)
Copyright © 2009 John Wiley & Sons, Inc
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
PROBLEM 10-3B
(a) (1) Purchase price
...
Shipping costs
...
Installation and testing
...
Machine
...
58,000
58,000
(2) Recorded cost
...
Depreciable cost
...
Annual depreciation
...
Accumulated Depreciation
...
Less: Salvage value
...
Years of useful life
...
(2)
$ 55,000
2,750
100
75
75
$ 58,000
Annual
Depreciation
Expense
$50,000
25,000
12,500
2,500**
$100,000
10,000
$90,000
÷
4
$ 22,500
Accumulated
Depreciation
$50,000
75,000
87,500
90,000
*100% ÷ 4-year useful life = 25% X 2 = 50%
...
Copyright © 2009 John Wiley & Sons, Inc
...
60 per unit
...
60 X 5,500 = $19,800
3
...
60 X 8,000 = 28,800
3
...
In the fourth year, the declining-balance method reports the
lowest amount of depreciation expense while the straight-line method
reports the highest
...
If the straight-line method
is used, the same amount of depreciation expense is recognized each
year
...
The amount of depreciation expense recognized using the units-of-activity
method is dependent on production, so this method could recognize more
or less depreciation expense than the other two methods in any year
depending on output
...
10-40
Copyright © 2009 John Wiley & Sons, Inc
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
10-41
PROBLEM 10-5B
(a) Apr
...
Cash
...
Accumulated Depreciation—
Equipment
...
Accumulated Depreciation—
Equipment
...
Gain on Disposal
...
depreciation—
equipment
1,200,000
14,000
182,000
420,000
2,000
$420,000
182,000
[($420,000 X 1/10 X 4) + $14,000]
Book value
Cash proceeds
Gain on disposal
June 1
July 1
Dec
...
Land
...
1,000,000
Equipment
...
1,100,000
Depreciation Expense
...
($300,000 X 1/10)
30,000
Accumulated Depreciation—
Equipment
...
Copyright © 2009 John Wiley & Sons, Inc
...
depreciation—
equipment
$300,000
300,000
($300,000 X 1/10 X 10)
Book value
(b) Dec
...
Accumulated Depreciation—
Buildings
...
Accumulated Depreciation—
Equipment
...
Buildings
...
Equipment
...
Total plant assets
...
Copyright © 2009 John Wiley & Sons, Inc
...
Apr
...
Land
2,000,000 June 1
1,200,000
2,860,000
340,000
Buildings
20,000,000
20,000,000
Bal
...
Accumulated Depreciation—Buildings
Bal
...
31 adj
...
8,400,000
Bal
...
Equipment
30,000,000 May 1
1,100,000 Dec
...
4,000,000
Dec
...
31
30,000
Dec
...
2,983,000
Bal
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
PROBLEM 10-6B
(a) Accumulated Depreciation—Delivery
Equipment
...
Delivery Equipment
...
Accumulated Depreciation—Delivery
Equipment
...
Delivery Equipment
...
Accumulated Depreciation—Delivery
Equipment
...
Delivery Equipment
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
26,000
14,000
40,000
29,000
26,000
15,000
40,000
10,000
26,000
4,000
40,000
(For Instructor Use Only)
10-45
PROBLEM 10-7B
(a) Jan
...
–
June
Research and Development
Expense
...
Sept
...
Patents
...
1
(b) Dec
...
Cash
...
Cash
...
Patents
...
Copyright
...
Copyright ($260,000 cost – $31,000 amortization) (2)
...
7,000
$120,000
229,000
$349,000
(1) Cost ($100,000 + $45,000); amortization ($10,000 + $15,000)
...
(d) The intangible assets of the company consist of two patents and two
copyrights
...
A copyright with a cost
of $60,000 is being amortized over 10 years; the other copyright with a
cost of $200,000 is being amortized over 50 years
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
PROBLEM 10-8B
1
...
Amortization Expense—Patents
[$8,000 – ($50,000 X 1/20)]
...
Research and Development Expense
...
5,500
Goodwill
...
2,000
110,000
5,500
2,000
Note: Goodwill should not be amortized because it has an indefinite life unlike
Patents
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
10-47
PROBLEM 10-9B
(a)
McLead Corp
...
$1,100,000
= 1
...
94 times
$1,050,000
(b) Based on the asset turnover ratio, McLead Corp
...
Its asset turnover ratio is 17% higher than
Gene’s asset turnover ratio
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
CHAPTER 10 COMPREHENSIVE PROBLEM SOLUTION
(a) 1
...
Cash
...
Depreciation Expense—Equipment
...
450
Cash
...
Equipment
...
3,500
2,250
3
...
Sales
...
Merchandise Inventory
...
Bad Debts Expense
...
3,500
5
...
08 X 9/12)
...
600
6
...
Prepaid Insurance
...
Depreciation Expense—Building
...
4,000
8
...
Accumulated Depreciation—Equipment
[($60,000 – $5,000) – ($55,000 X
...
9,900
9
...
Accumulated Depreciation—Equipment
[($13,800 – $1,800) ÷ 5] X 8/12
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
13,800
450
5,000
750
9,000
6,300
3,500
600
2,400
4,000
9,900
1,600
(For Instructor Use Only)
10-49
COMPREHENSIVE PROBLEM (Continued)
10
...
Patent
...
Salaries Expense
...
2,200
12
...
Rent Revenue
...
Interest Expense ($11,000 + $35,000) X
...
Interest Payable
...
900
2,200
2,000
Weygandt, Accounting Principles, 9/e, Solutions Manual
4,140
(For Instructor Use Only)
COMPREHENSIVE PROBLEM (Continued)
(b)
WINTERSCHID COMPANY
Trial Balance
December 31, 2010
Cash
...
Notes Receivable
...
Merchandise Inventory
...
Land
...
Equipment
...
Allowance for Doubtful Accounts
...
Accumulated Depreciation—Equipment
...
Salaries Payable
...
Notes Payable (short-term)
...
Notes Payable (long-term)
...
Winterschid, Drawing
...
Interest Revenue
...
Gain on Disposal
...
Cost of Goods Sold
...
Depreciation Expense—Equipment
...
Interest Expense
...
Amortization Expense–Patents
...
Total
...
Debits
$ 17,700
45,800
10,000
600
29,900
1,200
20,000
150,000
68,800
8,100
Credits
$
4,000
54,000
33,700
27,300
2,200
4,000
11,000
4,140
35,000
113,600
12,000
909,000
600
2,000
750
3,500
636,300
4,000
11,950
2,400
4,140
61,800
900
112,200
$1,201,290
Weygandt, Accounting Principles, 9/e, Solutions Manual
$1,201,290
(For Instructor Use Only)
10-51
COMPREHENSIVE PROBLEM (Continued)
(c)
WINTERSCHID COMPANY
Income Statement
For the Year Ended December 31, 2010
Sales
...
Gross Profit
...
Other Operating Expenses
...
Expense—Equipment
...
Expenses—Building
...
Insurance Expense
...
Total Operating Expense
...
Other Revenues and Gains
Rent Revenue
...
Interest Revenue
...
Net Income
...
Add: Net Income
...
Winterschid, Capital, 12/31/10
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
$113,600
75,160
188,760
12,000
$176,760
(For Instructor Use Only)
COMPREHENSIVE PROBLEM (Continued)
(d)
WINTERSCHID COMPANY
Balance Sheet
December 31, 2010
Assets
Current Assets
Cash
...
$ 45,800
Allowance for Doubtful Accounts
...
Interest Receivable
...
Prepaid Insurance
...
Property, Plant, and Equipment
Land
...
150,000
54,000
Less Accum
...
68,800
Equipment
...
Depr
...
Intangible Assets
Patent
...
$17,700
41,800
10,000
600
29,900
1,200
$101,200
20,000
96,000
35,100
151,100
8,100
$260,400
Liabilities and Owner’s Equity
Current Liabilities
Notes Payable (short-term)
...
Interest Payable
...
Salaries Payable
...
Long-term Liabilities
Notes Payable (long-term)
...
Owner’s Equity
Winterschid, Capital
...
Copyright © 2009 John Wiley & Sons, Inc
...
The cost of the
property, plant, and equipment is $21,896,000,000 as shown in Note 4
...
(see Note 4)
...
$1,406,000,000
...
(d) PepsiCo’s capital spending was:
2007:
2006:
$2,430,000,000
...
(e) PepsiCo reports amortizable intangible assets, net of $796,000,000,
and nonamortizable intangible assets of $6,417,000,000
...
10-54
Copyright © 2009 John Wiley & Sons, Inc
...
22 times
$28,857 ÷
$43,269 + $29,963
2
=
...
It shows the dollars of sales generated by each
dollar invested in assets
...
22) was 54%
higher than Coca-Cola (
...
Therefore, it can be concluded that PepsiCo
was more efficient during 2007 in utilizing assets to generate sales
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
10-55
BYP 10-3
EXPLORING THE WEB
Answers will vary depending on the company selected
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
BYP 10-4
DECISION MAKING ACROSS THE ORGANIZATION
(a)
Reimer Company—Straight-line method
Annual Depreciation
Building [($320,000 – $20,000) ÷ 40]
...
Total annual depreciation
...
$52,500
Lingo Company—Double-declining-balance method
Year
Asset
Computation
Annual
Depreciation
2008
Building
Equipment
Building
Equipment
Building
Equipment
$320,000 X 5%
$110,000 X 20%
$304,000 X 5%
$ 88,000 X 20%
$288,800 X 5%
$ 70,400 X 20%
$16,000
22,000
15,200
17,600
14,440
14,080
2009
2010
(b)
Year
2008
2009
2010
Total net
income
Accumulated
Depreciation
$38,000
32,800
28,520
$99,320
Reimer
Company
Net Income
Lingo
Company
Net Income
As Adjusted
Computations for Lingo Company
$ 84,000
88,400
90,000
$ 88,500
91,300
96,020
$68,000 + $38,000 – $17,500 = $88,500
$76,000 + $32,800 – $17,500 = $91,300
$85,000 + $28,520 – $17,500 = $96,020
$262,400
$275,820
(c) As shown above, when the two companies use the same depreciation
method, Lingo Company is more profitable than Reimer Company
...
Weygandt, Accounting Principles, 9/e, Solutions Manual
(For Instructor Use Only)
10-57
BYP 10-4 (Continued)
(1) its earnings are generating more cash than the earnings of Reimer
Company, and (2) depreciation expense has no effect on cash
...
If this is done, it can be seen that Lingo Company’s operations generate more cash ($229,000 + $99,320 = $328,320) than Reimer
Company’s ($262,400 + $52,500 = $314,900)
...
Vogts should buy Lingo Company
...
10-58
Copyright © 2009 John Wiley & Sons, Inc
...
Under this method, only the costs of successful
exploration are included in the cost of the natural resource, and the costs
of unsuccessful explorations are expensed
...
Under this method,
a depletion cost per unit is computed based on the total number of units
expected to be extracted
...
Copyright © 2009 John Wiley & Sons, Inc
...
Shelly McGlone, controller
...
Potential investors in Buster Container Company
...
There is nothing per se
unethical about changing the estimate either of the life of an asset or of
an asset’s salvage value if the change is an attempt to better match cost
and revenues and is a better allocation of the asset’s depreciable cost
over the asset’s useful life
...
The fact that the competition uses a longer life on its equipment is not
necessarily relevant
...
The competition may use its equipment
fewer hours a year (e
...
, one shift rather than two shifts daily) than Buster
Container Company
...
Old Estimates
$3,100,000
300,000
2,800,000
$ 350,000
Asset cost
Estimated salvage
Depreciable cost
Depreciation per year (1/8)
Asset cost
Estimated salvage
Depreciable cost
Depreciation taken to date ($350,000 X 2)
Remaining life in years
Depreciation per year
10-60
Copyright © 2009 John Wiley & Sons, Inc
...
Most companies are required to expense all costs related
to the maintenance of a brand name
...
The only way significant costs related to the value of the
brand are reported on balance sheet is when a company purchases
another company that has a significant tradename (brand)
...
A conservative approach
is used in this area because the value of the brand can be extremely
difficult to determine
...
Copyright © 2009 John Wiley & Sons, Inc
Title: Accounting chapter 10 ( Depreciation) Answers
Description: chapter 10 ( Depreciation) Answers
Description: chapter 10 ( Depreciation) Answers