University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

339

Pages:

3
Author:

stud_ice13

Exercise 8-1: Cost of Plant Assets 1. Calculate Total Cost for Machine: o Invoice cost: $12,500 o Discount taken: 2%×12,500=250 o Net cost after discount: $12,500 - $250 = $12,250 o Transportation costs: $360 o Mounting and power connections: $895 o Assembly: $475 o Materials for operation: $40 Total Cost Recorded for the Machine: $12,250 + $360 + $895 + $475 + $40 = $14,020 Exercise 8-2: Recording Costs of Assets 1. Journal Entry for Land and Building Construction: bash Debit: Land (390,000 + 33,500 + 47,000) Debit: Building Debit: Land Improvements Credit: Cash $470,500 $1,452,200 $87,800 $2,010,500 Exercise 8-3: Lump-Sum Purchase of Plant Assets 1. Allocation of Total Cost Among Land, Land Improvements, and Building: o Total appraised value: 157,040+58,890+176,670=392,600 o Land: 157,040392,600×395,380=158,137 o Land Improvements: 58,890392,600×395,380=59,301 o Building: 176,670392,600×395,380=177,942 Journal Entry: bash Debit: Land Debit: Land Improvements Debit: Building Credit: Cash $158,137 $59,301 $177,942 $395,380 Exercise 8-4: Straight-Line Depreciation 1. Annual Depreciation (Straight-Line): o Cost: $43,500, Salvage Value: $5,000, Useful Life: 10 years o Annual Depreciation: 43,500−5,00010=3,850 Exercise 8-5: Units-of-Production Depreciation 1. Depreciation per Unit: o Total Depreciable Cost: $43,500 - $5,000 = $38,500 o Depreciation per unit: 38,500385,000=0.10 o Second-Year Depreciation (32,500 units): 32,500×0.10=3,250 Exercise 8-6: Double-Declining-Balance Depreciation 1. Double-Declining-Balance Calculation: o DDB Rate: 2×110=20% o First-Year Depreciation: 43,500×20%=8,700 o Second-Year:  Book Value: $43,500 - $8,700 = $34,800  Depreciation: $34,800 × 20% = $6,960 Exercise 8-7: Straight-Line Depreciation (NewTech Equipment) 1. Annual Depreciation: o Cost: $154,000, Salvage Value: $25,000, Useful Life: 4 years o Depreciation per year: 154,000−25,0004=32,250 2. Depreciation and Book Value Schedule: Year Depreciation Accumulated Depreciation Book Value 1 $32,250 $32,250 $121,750 2 $32,250 $64,500 $89,500 3 $32,250 $96,750 $57,250 4 $32,250 $129,000 $25,000 Exercise 8-8: Double-Declining-Balance Depreciation (NewTech Equipment) 1. Double-Declining-Balance Schedule: o DDB Rate: 2×14=50% Year Depreciation Book Value 1 $154,000 × 50% = $77,000 $77,000 2 $77,000 × 50% = $38,500 $38,500 3 $38,500 × 50% = $19,250 $19,250 4 Adjusted to reach Salvage Value $25,000 $25,000 Exercise 8-9: Straight-Line Depreciation and Income Effects 1. Annual Depreciation (Straight-Line): o Cost: $238,400, Salvage Value: $43,600, Useful Life: 5 years o Depreciation: 238,400−43,6005=38,960 2. Annual Income Calculation: Year Income Before Depreciation Depreciation Expense Net Income 1 $88,500 $38,960 $49,540 ... Repeat for each year $38,960 $49,540 Exercise 8-10: Double-Declining-Balance (Tory Enterprises) 1. DDB Rate: 2×15=40% 2. Depreciation and Income Schedule (Partial for 5 Years): Year Depreciation Expense Net Income (Before Depreciation $88,500 - Depreciation) 1 $238,400 × 40% = $95,360 -$6,860 2 Book Value × 40%...