Chap 11 Kieso 15e Hwk Solutions
CHAPTER 11
Depreciation, Impairments, and Depletion
EXERCISE 11-4 (15–25 minutes)
(a) $315,000 – $15,000 = $300,000; $300,000 ÷ 10 yrs. = $30,000
(b) $300,000 ÷ 240,000 units = $1.25; 25,500 units X $1.25 = $31,875
(c) $300,000 ÷ 25,000 hours = $12.00 per hr.; 2,650 hrs. X $12.00 = $31,800
(d)
10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55 OR n(n + 1)
=
10(11)
= 55
2
2
10
X $300,000 X 1/3 =
$18,182
55
9
X $300,000 X 2/3 = 32,727
55
Total for 2015
$50,909
(e) $315,000 X 20% X 1/3 =
$21,000
[$315,000 – ($315,000 X 20%)] X 20% X 2/3 = 33,600
Total for 2015
$54,600
[May also be computed as 20% of ($315,000 – 2/3 of 20% of $315,000)]
EXERCISE 11-8 (20–25 minutes)
Old Machine
June 1, 2012
Purchase
$31,000
Freight
200
Installation 500
Total cost
$31,700
Annual depreciation charge: ($31,700 – $2,500) ÷ 10 = $2,920
On June 1, 2013, debit the old machine for $1,980; the revised total cost is $33,680 ($31,700 + $1,980); thus the revised annual depreciation charge is: ($33,680 – $2,500 – $2,920) ÷ 9 = $3,140.
Book value, old machine, June 1, 2016:
[$33,680 – $2,920 – ($3,140 X 3)] =
$21,340
Less: Fair value 20,000
Loss on exchange
1,340
Cost of removal 75 Total loss
$ 1,415
(Note to instructor: The above computation is done to determine whether there is a gain or loss from the exchange of the old machine with the new machine and to show how the cost of removal might be reported. Also, if a gain occurs, the gain is not deferred (1) because the exchange has commercial substance and (2) the cost paid exceeds 25% of the total value of the property received.)
New Machine
Basis of new machine
Cash paid ($35,000 – $20,000)
$15,000
Fair value of old machine
20,000
Installation cost 1,500
Total cost of new machine
$36,500
Depreciation for the year beginning June 1, 2016 = ($36,500 – $4,000) ÷ 10 = $3,250.
EXERCISE 11-12 (20–25 minutes)
(a) 1988–1997—($2,000,000 – $60,000) ÷ 40 = $48,500/yr.
(b)
Depreciation, Impairments, and Depletion
EXERCISE 11-4 (15–25 minutes)
(a) $315,000 – $15,000 = $300,000; $300,000 ÷ 10 yrs. = $30,000
(b) $300,000 ÷ 240,000 units = $1.25; 25,500 units X $1.25 = $31,875
(c) $300,000 ÷ 25,000 hours = $12.00 per hr.; 2,650 hrs. X $12.00 = $31,800
(d)
10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55 OR n(n + 1)
=
10(11)
= 55
2
2
10
X $300,000 X 1/3 =
$18,182
55
9
X $300,000 X 2/3 = 32,727
55
Total for 2015
$50,909
(e) $315,000 X 20% X 1/3 =
$21,000
[$315,000 – ($315,000 X 20%)] X 20% X 2/3 = 33,600
Total for 2015
$54,600
[May also be computed as 20% of ($315,000 – 2/3 of 20% of $315,000)]
EXERCISE 11-8 (20–25 minutes)
Old Machine
June 1, 2012
Purchase
$31,000
Freight
200
Installation 500
Total cost
$31,700
Annual depreciation charge: ($31,700 – $2,500) ÷ 10 = $2,920
On June 1, 2013, debit the old machine for $1,980; the revised total cost is $33,680 ($31,700 + $1,980); thus the revised annual depreciation charge is: ($33,680 – $2,500 – $2,920) ÷ 9 = $3,140.
Book value, old machine, June 1, 2016:
[$33,680 – $2,920 – ($3,140 X 3)] =
$21,340
Less: Fair value 20,000
Loss on exchange
1,340
Cost of removal 75 Total loss
$ 1,415
(Note to instructor: The above computation is done to determine whether there is a gain or loss from the exchange of the old machine with the new machine and to show how the cost of removal might be reported. Also, if a gain occurs, the gain is not deferred (1) because the exchange has commercial substance and (2) the cost paid exceeds 25% of the total value of the property received.)
New Machine
Basis of new machine
Cash paid ($35,000 – $20,000)
$15,000
Fair value of old machine
20,000
Installation cost 1,500
Total cost of new machine
$36,500
Depreciation for the year beginning June 1, 2016 = ($36,500 – $4,000) ÷ 10 = $3,250.
EXERCISE 11-12 (20–25 minutes)
(a) 1988–1997—($2,000,000 – $60,000) ÷ 40 = $48,500/yr.
(b)