Chapter 9 Practice Problems

Chapter 9 Practice Problems
S9-2.

Asset
Market
Value
Percentage of Total Value
× Total
Purchase
Price
= Assigned Cost of Each Asset
Land
$ 80,000
$80,000 / $160,000 = 50%
× $150,000
= $ 75,000
Building
60,000
$60,000 / $160,000 = 38%
× $150,000
= 57,000
Equipment
20,000
$20,000 / $160,000 = 12%
× $150,000
= 18,000
Total
$ 160,000
100%

$ 150,000

Date
Accounts and Explanation
Debit
Credit

Land
75,000

Building
57,000

Equipment
18,000

Notes Payable

150,000

To record purchase of land, building, and equipment in exchange for note payable.

S9-4.

Requirement 1

a.
Straight-line
=
(Cost − Residual value) / Useful life

=
($35,000,000 ̶ $5,000,000) / 5 years

=
$6,000,000 per year

b.
Depreciation per unit
=
(Cost – Residual value) / Useful life in units

=
($35,000,000 ̶ $5,000,000) / 6,000,000 miles

=
$5 per mile

Units-of-production
=
Depreciation per unit × Current year usage

=
$5 per mile × 1,000,000 miles

=
$5,000,000 for year 1

c.
Double-declining-balance
=
(Cost – Accumulated depreciation) × 2 × (1 / Useful life)

=
($35,000,000 ̶ $0) × 2 × (1/ 5 years)

=
$14,000,000 for year 1

S9-5.

a.
Straight-line
=
(Cost − Residual value) / Useful life

=
($35,000,000 ̶ $5,000,000) / 5 years

=
$6,000,000 per year, second year = $6,000,000

b.
Depreciation per unit
=
(Cost – Residual value) / Useful life in units

=
($35,000,000 ̶ $5,000,000) / 6,000,000 miles

=
$5 per mile

Units-of-production
=
Depreciation per unit × Current year usage

=
$5 per mile × 1,500,000 miles

=
$7,500,000 in year 2

c.
Double-declining-balance
=
(Cost – Accumulated depreciation) × 2 × (1 / Useful life)

=
($35,000,000 ̶ $0) × 2 × (1/ 5 years)

=
$14,000,000 in year 1

=
(Cost – Accumulated depreciation) × 2 × (1 / Useful life)

=
($35,000,000 ̶ $14,000,000) × 2 × (1/ 5 years)

=
$8,400,000 in year 2

S9-7.

Straight-line
=
(Cost − Residual value) / Useful life

=
($80,000 ̶ $8,000)