Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd
Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd
2nd Edition
ISBN: 9781337912259
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 11, Problem 20P

1.

To determine

Prepare a schedule that analyzes each of the plant assets of Company P during 2016.

1.

Expert Solution
Check Mark

Explanation of Solution

Property, Plant, and Equipment:

Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.

Prepare a schedule that analyzes each of the plant assets of Company P during 2016 as follows:

Corporation P
Analysis of Changes in Plant Assets
For the Year Ended December 31, 2016
ParticularsBalance as on December 31, 2015IncreaseDecreaseBalance as on December 31, 2016
Land$350,000 $438,000 (1)$788,000
Land improvements 180,000180,000
Building1,500,0001,500,000
Machinery and equipment 1,158,000287,000 (2)58,0001,387,000
Automobiles 150,00019,000 (3)  18,000151,000
Totals$3,338,000$744,000$76,000$4,006,000

Table (1)

Working note (1):

Compute the cost of land acquired:

ParticularsAmount ($)
Stock exchanged $380,000
Legal fees and title insurance23,000
Razing existing building35,000
Cost of land acquired438,000

Table (2)

Note:

10,000 shares which had a market price of $38 were exchanged ($10,000×$38).

Working note (2):

Compute the cost of machinery and equipment:

ParticularsAmount ($)
Invoice cost $260,000
Installation  cost27,000
Cost of Machinery287,000

Table (3)

Working note (3):

1. Compute the depreciation rate under double declining rate:

Useful life = 2 years

Depreciation rate=100%2 years×1.5=75%

2. Calculate the carrying cost of trade –in:

Carrying value=cost of auto mobileDepreciation=$18,000[$18,000×75100]=$18,000$13,500=4,500

3. Compute the cost of new automobiles:

ParticularsAmount ($)
Carrying amount of trade-in$4,500
Add: Cash paid15,250
Sub total 19,750
Less: Loss on trade-in750
Cost recorded for new automobile19,000

Table (4)

2.

To determine

Prepare a schedule screening the depreciation expense for each asset of Company P for the year ended December 31, 2016.

2.

Expert Solution
Check Mark

Explanation of Solution

Depreciation expense: Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolesces.

Straight-line depreciation method: The depreciation method which assumes that the consumption of economic benefits of long-term asset could be distributed equally throughout the useful life of the asset is referred to as straight-line method.

Double-declining-balance method: The depreciation method which assumes that the consumption of economic benefits of long-term asset is high in the early years but gradually declines towards the end of its useful life is referred to as double-declining-balance method.

Prepare a schedule screening the depreciation expense for each asset of Company P for the year ended December 31, 2016 as follows:

Depreciation and amortization expense:

Company B
Depreciation and amortization expense
For the year ended December 31, 2016
Particulars$
Depreciation expense for Land improvement (5)$12,000
Depreciation expense for building (7)$86,250
Depreciation expense for equipment and machinery (11)$140,150
Depreciation expense for automotive equipment (10)$19,000
Total depreciation and amortization expense for 2016$257,400

Table (5)

Working note (4):

Compute the straight line rate:

Useful life = 15 years

Depreciation rate=100%15 years=6.67%

Working note (5):

Calculate the depreciation expense of Land improvement:

Depreciation expense=Land improvement×Depreciation Rate (5)=$180,000×6.67100=$12,000

Working note (6):

Compute the depreciation rate under 150% balance method:

Useful life = 20 years

Depreciation rate=100%20 years×1.5=7.5%

Working note (7):

Calculate the depreciation expense of building under 150%-declining balance method.

Depreciation expense=(Aquisition costAccumulated depreciation)×Depreciation Rate (6)=($1,500,000$350,000)×7.5100=$1,150,000×7.5100=$86,250

Working note (8):

Calculate the depreciation expense of remaining machinery under straight line method.

Depreciation expense = (Cost of acquisition Residual value)(Purchase cost of machinerysold on March31, 2016 )Estimated useful life=($1,158,000$0)$58,00010 years=$110,000

Working note (9):

Calculate the depreciation expense for machine purchased on January 2, 2016 under straight line method.

Depreciation expense = [(The cost of machine purchased+Installation cost)Estimated useful life]=$260,000+$27,00010 years=$28,700

Working note (10):

Calculate the depreciation expense for machinery sold under straight line method.

Depreciation expense = [(Cost of machineResidual value  )Estimated useful life×Depreciation incurredMonths in a year]=$58,000$010 years×3 months (January to March)12 months=$1,450

Working note (11):

Calculate the total depreciation expense for machinery for 2016.

Total depreciationexpense} = [Depreciation expense for remaining machinery+Depreciation expense for machinery purchased+Depreciation expense for machinery sold]=$110,000(8)+$28,700(9)+$1,450(10)=$140,150

Working note (12):

Compute the depreciation rate under 150% balance method:

Useful life = 3 years

Depreciation rate=100%3 years×1.5=50%

Working note (13):

Calculate the depreciation expense of automobiles under 150%-declining balance method.

Depreciation expense=(Aquisition costAccumulated depreciation)×Depreciation Rate (12)=($150,000$112,000)×50100=$38,000×50100=$19,000

3.

To determine

Prepare a schedule screening the gain or loss from disposal of assets of Company P that would appear on the income statement for the year ended December 31, 2016.

3.

Expert Solution
Check Mark

Explanation of Solution

Prepare a schedule screening the gain or loss from disposal of assets of Company B that would appear on the income statement for the year ended December 31, 2016 as follows:

Company B
Gain or loss from disposal of assets
For the year ended December 31, 2016
ParticularsAmountAmount
Gain on sale of machinery:  
Selling price$36,500 
Less: Carrying value of machinery sold (15)$33,350$3,150
Less: Loss from trade-in:  
Carrying amount of trade-in4,500  
Less: Trade in allowed ($9,000$15,250)$3,750750 
Net gain on asset disposal for 2016 $2,400

Table (6)

Working note (14):

Calculate the accumulated depreciation for machine sold.

Depreciation expense = [Cost of machineryEstimated useful life×Number of year expense incurred]+[Depreciation expense for 2016]=$58,000 10 years×4 years (2012 to 2015)+$1,450 (10)=$23,200+$1,450 (10)=$24,650

Working note (15):

Calculate the carrying cost of machinery sold:

Carrying value=cost of machiner soldDepreciation=$58,000$24,650 (14)=$33,350

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Chapter 11 Solutions

Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd

Ch. 11 - Under U.S. GAAP, in a year in which the fair value...Ch. 11 - Prob. 12GICh. 11 - Prob. 13GICh. 11 - Compare the group and composite methods of...Ch. 11 - Prob. 15GICh. 11 - Describe the accounting for changes and...Ch. 11 - Prob. 17GICh. 11 - Prob. 18GICh. 11 - Explain the meaning of an impaired asset and...Ch. 11 - Prob. 20GICh. 11 - Prob. 21GICh. 11 - Prob. 22GICh. 11 - (Appendix 11.1) Why might depreciation on a...Ch. 11 - A method that excludes residual value from the...Ch. 11 - Prob. 2MCCh. 11 - Prob. 3MCCh. 11 - Prob. 4MCCh. 11 - A machine with a 4-year estimated useful life and...Ch. 11 - At the end of the expected useful life of a...Ch. 11 - The composite depreciation method: a. is applied...Ch. 11 - Prob. 8MCCh. 11 - A fixed asset with a 5-year estimated useful life...Ch. 11 - Crowder Company acquired a tract of land...Ch. 11 - Susquehanna Company purchased an asset at the...Ch. 11 - Akron Incorporated purchased an asset at the...Ch. 11 - Albany Corporation purchased equipment at the...Ch. 11 - Utica Machinery Company purchases an asset for...Ch. 11 - In Year 1, Utica Machinery Company uses the asset...Ch. 11 - At the beginning of Year 1, Herkimer Co....Ch. 11 - At the end of Year 1, Herkimer Co. sells two...Ch. 11 - Buffalo, Inc., uses composite depreciation for its...Ch. 11 - Prob. 9RECh. 11 - Assume the same information as in RE11-3, except...Ch. 11 - Oneonta Co. owns equipment with a cost of 300,000...Ch. 11 - At the beginning of the current year, Andy Company...Ch. 11 - Prob. 13RECh. 11 - (Appendix 11.1) Auburn Company purchased an asset...Ch. 11 - Gruman Company purchased a machine for 220,000 on...Ch. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Prob. 4ECh. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Loban Company purchased four cars for 9,000 each...Ch. 11 - Wilcox Company acquires four machines that have...Ch. 11 - Lightning Delivery Company purchased a new...Ch. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Bailand Company purchased a building for 210,000...Ch. 11 - Prob. 14ECh. 11 - On January 1, 2012, Vallahara Company purchased...Ch. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 1PCh. 11 - Prob. 2PCh. 11 - Prob. 3PCh. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - Prob. 6PCh. 11 - Prob. 7PCh. 11 - Prob. 8PCh. 11 - During 2016, Ryel Companys controller asked you to...Ch. 11 - Prob. 10PCh. 11 - On January 1, 2011, Borstad Company purchased...Ch. 11 - Prob. 12PCh. 11 - Prob. 13PCh. 11 - Prob. 14PCh. 11 - Prob. 15PCh. 11 - Prob. 16PCh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 1CCh. 11 - Prob. 2CCh. 11 - Straight-Line and Composite Depreciation Portland...Ch. 11 - Depreciation continues to be one of the most...Ch. 11 - The following two statements concern depreciation:...Ch. 11 - Prob. 6C
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