Chapter Review
10-9ePractice Exercises
Straight-line depreciation
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EE 10-1 A building acquired at the beginning of the year at a cost of $1,630,000 has an estimated residual value of $340,000 and an estimated useful life of 10 years. Determine (a) the depreciable cost, (b) the straight-line rate, and (c) the annual straight-line depreciation.
Straight-Line Depreciation
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EE 10-1 Equipment acquired at the beginning of the year at a cost of $470,000 has an estimated residual value of $62,000 and an estimated useful life of five years. Determine (a) the depreciable cost, (b) the straight-line rate, and (c) the annual straight-line depreciation.
Units-of-Activity Depreciation
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EE 10-2 A truck acquired at a cost of $202,800 has an estimated residual value of $18,000, has an estimated useful life of 440,000 miles, and was driven 113,000 miles during the year. Determine (a) the depreciable cost, (b) the depreciation rate, and (c) the units-of-activity depreciation for the year.
Units-of-Activity Depreciation
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EE 10-2 A tractor acquired at a cost of $678,000 has an estimated residual value of $48,000, has an estimated useful life of 45,000 hours, and was operated 3,330 hours during the year. Determine (a) the depreciable cost, (b) the depreciation rate, and (c) the units-of-activity depreciation for the year.
Double-Declining-Balance Depreciation
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EE 10-3 A building acquired at the beginning of the year at a cost of $1,193,000 has an estimated residual value of $220,000 and an estimated useful life of 40 years. Determine (a) the double-declining-balance rate and (b) the double-declining-balance depreciation for the first year.
Double-Declining-Balance Depreciation
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EE 10-3 Equipment acquired at the beginning of the year at a cost of $540,000 has an estimated residual value of $40,000 and an estimated useful life of 10 years. Determine (a) the double-declining-balance rate and (b) the double-declining-balance depreciation for the first year.
Revision of Depreciation
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EE 10-4 Equipment with a cost of $304,000 has an estimated residual value of $41,600, has an estimated useful life of 16 years, and is depreciated by the straight-line method. (a) Determine the amount of the annual depreciation. (b) Determine the book value at the end of the tenth year of use. (c) Assuming that at the start of the eleventh year the remaining life is estimated to be eight years and the residual value is estimated to be $16,800, determine the depreciation expense for each of the remaining eight years.
Revision of Depreciation
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EE 10-4 A truck with a cost of $123,000 has an estimated residual value of $24,000, has an estimated useful life of 12 years, and is depreciated by the straight-line method. (a) Determine the amount of the annual depreciation. (b) Determine the book value at the end of the seventh year of use. (c) Assuming that at the start of the eighth year the remaining life is estimated to be five years and the residual value is estimated to be $15,000, determine the depreciation expense for each of the remaining five years.
Capital and Revenue Expenditures
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EE 10-5 On February 14, Foster Associates Co. paid $4,700 to repair the transmission on one of its delivery vans. In addition, Foster paid $920 to install a GPS system in its van. Journalize the entries for the transmission and GPS system expenditures.
Capital and Revenue Expenditures
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EE 10-5 On August 7, Blue Ocean Inflatables Co. paid $2,800 to install a hydraulic lift and $70 for an air filter for one of its delivery trucks. Journalize the entries for the new lift and air filter expenditures.
Sale of Equipment
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EE 10-6 Equipment was acquired at the beginning of the year at a cost of $280,000. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of 16 years and an estimated residual value of $14,000.
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What was the depreciation for the first year?
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Assuming that the equipment was sold at the end of the second year for $230,400, determine the gain or loss on the sale of the equipment.
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Journalize the entry to record the sale.
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Sale of Equipment
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EE 10-6 Equipment was acquired at the beginning of the year at a cost of $287,100. The equipment was depreciated using the straight-line method based on an estimated useful life of nine years and an estimated residual value of $27,000.
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What was the depreciation for the first year?
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Assuming the equipment was sold at the end of the fifth year for $138,700, determine the gain or loss on the sale of the equipment.
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Journalize the entry to record the sale.
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Depletion
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EE 10-7 Snowcap Mining Co. acquired mineral rights for $342,720,000. The mineral deposit is estimated at 306,000,000 tons. During the current year, 55,600,000 tons were mined and sold.
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Determine the depletion rate.
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Determine the amount of depletion expense for the current year.
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Journalize the adjusting entry on December 31 to recognize the depletion expense.
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Depletion
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EE 10-7 Poff Mining Co. acquired mineral rights for $195,650,000. The mineral deposit is estimated at 559,000,000 tons. During the current year, 22,900,000 tons were mined and sold.
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Determine the depletion rate.
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Determine the amount of depletion expense for the current year.
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Journalize the adjusting entry on December 31 to recognize the depletion expense.
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Impaired Goodwill and Amortization of Patent
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EE 10-8 On December 31, it was estimated that goodwill of $4,700,000 was impaired. In addition, a patent with an estimated useful economic life of 12 years was acquired for $1,260,000 on April 1.
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Journalize the adjusting entry on December 31 for the impaired goodwill.
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Journalize the adjusting entry on December 31 for the amortization of the patent rights.
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Impaired Goodwill and Amortization of Patent
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EE 10-8 On December 31, it was estimated that goodwill of $1,600,000 was impaired. In addition, a patent with an estimated useful economic life of 15 years was acquired for $594,000 on August 1.
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Journalize the adjusting entry on December 31 for the impaired goodwill.
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Journalize the adjusting entry on December 31 for the amortization of the patent rights.
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Fixed Asset Turnover Ratio
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EE 10-9 Financial statement data for years ending December 31 for Dennis Company follow:
Year 2 Year 1 Sales $4,521,000 $3,960,000 Fixed assets: Beginning of year 1,140,000 1,060,000 End of year 1,600,000 1,140,000 -
Determine the fixed asset turnover ratio for Year 1 and Year 2.
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Does the change in the fixed asset turnover ratio from Year 1 to Year 2 indicate a favorable or an unfavorable change?
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Fixed Asset Turnover Ratio
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EE 10-9 Financial statement data for years ending December 31 for Xiong Company follow:
Year 2 Year 1 Sales $1,560,000 $1,026,000 Fixed assets: Beginning of year 580,000 500,000 End of year 620,000 580,000 -
Determine the fixed asset turnover ratio for Year 1 and Year 2.
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Does the change in the fixed asset turnover ratio from Year 1 to Year 2 indicate a favorable or an unfavorable change?
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