Posted: September 13th, 2017

Intermediate Accounting

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Task 4.2

Depreciation
Instructions:
1. After reading the study material for this module works the following exercises from Chapter 11 E-book Kieso, DE, Weygandt, JJ, & Warfield, TD (2010). Intermediate accounting (13th ed.). Hoboken, NJ: Wiley.

a. BE11-8 (p.570) (Impairment, 4 points)
b. BE11-9 (p.570) (Exhaustion, 4 points)
c. E11-4 (p.571) (calculation of depreciation, 20 points)
d. E11-5 (p.571) (calculation of depreciation, 16 points)

2. You must submit answers to the exercises in full.
3. Save the task in Excel format

Exercises:

BE11-8 Jurassic Company owns machinery that cost $900,000 and has accumulated depreciation of $380,000. The expected future net cash flows from the use of the asset are expected to be $500,000. The fair value of the equipment is $400,000. Prepare the journal entry, if any, to record the impairment loss.

 

BE11-9 Everly Corporation acquires a coal mine at a cost of $400,000. Intangible development costs total $100,000. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $80,000), after which it can be sold for $160,000. Everly estimates that 4,000 tons of coal can be extracted. If 700 tons are extracted the first year, prepare the journal entry to record depletion.

 

E11-4 (Depreciation Computations—Five Methods) Wenner Furnace Corp. purchased machinery for $279,000 on May 1, 2010. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and working hours of 25,000. During 2011 Wenner Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units.

Instructions:

From the information given, compute the depreciation charge for 2011 under each of the following methods. (Round to the nearest dollar.)

(a) Straight-line.

(b)Units-of-output.

(c)Working hours.

(d) Sum-of-the-years’-digits.

(e)Double-declining-balance.

 

E11-5 (Depreciation Computations—Four Methods) Maserati Corporation purchased a new machine for its assembly process on August 1, 2010. The cost of this machine was $150,000. The company estimated that the machine would have a salvage value of $24,000 at the end of its service life. Its life is estimated at 5 years and its working hours are estimated at 21,000 hours. Year-end is December 31.

Instructions:

Compute the depreciation expense under the following methods. Each of the following should be considered unrelated.

(a) Straight-line depreciation for 2010.

(b)Activity method for 2010, assuming that machine usage was 800 hours.

(c) Sum-of-the-years’-digits for 2011.

(d)Double-declining-balance for 2011.

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