Financial Accounting, Student Value Edition (5th Edition)
5th Edition
ISBN: 9780134728520
Author: Robert Kemp, Jeffrey Waybright
Publisher: PEARSON
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Textbook Question
Chapter 8, Problem 22AE
Mercy Medical Center bought equipment on January 2 for $42,000. The equipment was expected to remain in service for four years and to perform 1,200 operations. At the end of the equipment’s useful life, Mercy estimates that its residual value will be $6,000. The equipment performed 120 operations the first year, 360 the second year, 480 the third year, and 240 the fourth year.
Requirements
- 1. Prepare a schedule of depreciation expense per year for the equipment under the three depreciation methods. After two years under double-declining balance depreciation, the company switched to the straight-line method. Show your computations.
- 2. Which method most closely tracks the wear and tear on the equipment?
- 3. Which method would Mercy prefer to use for income tax purposes in the first years of the equipment’s life? Explain in detail why a taxpayer would prefer this method.
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(Learning Objective 3: Compute and record depreciation after a change in usefullife of the asset) Fun Town Amusement Park paid $500,000 for a concession stand. Fun Townstarted out depreciating the building using the straight-line method over 25 years with a residualvalue of zero. After using the concession stand for four years, Fun Town determines that thebuilding will remain useful for only five more years. Record Fun Town’s depreciation on theconcession stand for year five using the straight-line method.
(Learning Objective 3: Change a plant asset’s useful life) Chester Consultantspurchased a building for $430,000 and depreciated it on a straight-line basis over 40 years. Theestimated residual value was $70,000. After using the building for 20 years, Chester realizedthat the building would remain useful only 14 more years. Starting with the 21st year, Chesterbegan depreciating the building over the newly revised total life of 34 years and decreasedthe estimated residual value to $12,980. Record depreciation expense on the building foryears 20 and 21.
E9-20 Computing depreciation-three methods
Learning Objective 2
1. Double-declining-balance, 12/31/19, Exp. $8,250
Crispy Fried Chicken bought equipment on January 2, 2018, for $33,000. The
equipment was expected to remain in service for four years and to operate for
6,750 hours. At the end of the equipment's useful life, Crispy's estimates that its
residual value will be $6,000. The equipment operated for 675 hours the first
year, 2,025 hours the second year, 2,700 hours the third year, and 1,350 hours the
fourth year.
Requirements
1. Prepare a schedule of depreciation expense, accumulated depreciation,
and book value per year for the equipment under the three depreciation
methods: straight-line, units-of-production, and double-declining-balance.
Show your computations. Note: Three depreciation schedules must be
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2. Which method tracks the wear and tear on the equipment most closely?
Chapter 8 Solutions
Financial Accounting, Student Value Edition (5th Edition)
Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - What is depreciation, and why is it used in...Ch. 8 - Prob. 5DQCh. 8 - Which depreciation method would be moot...Ch. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ
Ch. 8 - Prob. 1SCCh. 8 - Prob. 2SCCh. 8 - How should a capital expenditure for a long-term...Ch. 8 - Which depreciation method usually produces the...Ch. 8 - Prob. 5SCCh. 8 - Prob. 6SCCh. 8 - Prob. 7SCCh. 8 - Prob. 8SCCh. 8 - Prob. 9SCCh. 8 - Prob. 10SCCh. 8 - Prob. 11SCCh. 8 - Prob. 12SCCh. 8 - Prob. 1SECh. 8 - Long-term asset terms (Learning Objective 1) 5-10...Ch. 8 - Prob. 3SECh. 8 - Lump-sum purchase (Learning Objective 2) 5-10 min....Ch. 8 - Errors in accounting for long-term assets...Ch. 8 - Concept of depreciation (Learning Objective 3)...Ch. 8 - Depreciation methods (Learning Objective 3) 10-15...Ch. 8 - Depreciation methods (Learning Objective 3) 10-15...Ch. 8 - Prob. 9SECh. 8 - Prob. 10SECh. 8 - Prob. 11SECh. 8 - Prob. 12SECh. 8 - Prob. 13SECh. 8 - Prob. 14SECh. 8 - Prob. 15SECh. 8 - Other long term assets (Learning Objective 8) 5-10...Ch. 8 - Prob. 17SECh. 8 - Prob. 18AECh. 8 - Prob. 19AECh. 8 - Prob. 20AECh. 8 - Prob. 21AECh. 8 - Depreciation methods (Learning Objective 3) 15-20...Ch. 8 - Prob. 23AECh. 8 - Prob. 24AECh. 8 - Prob. 25AECh. 8 - Prob. 26AECh. 8 - Prob. 27AECh. 8 - Prob. 28AECh. 8 - Prob. 29AECh. 8 - Prob. 30AECh. 8 - Prob. 31AECh. 8 - Prob. 32BECh. 8 - Prob. 33BECh. 8 - Prob. 34BECh. 8 - Prob. 35BECh. 8 - Prob. 36BECh. 8 - Prob. 37BECh. 8 - Prob. 38BECh. 8 - Prob. 39BECh. 8 - Prob. 40BECh. 8 - Prob. 41BECh. 8 - Prob. 42BECh. 8 - Prob. 43BECh. 8 - Prob. 44BECh. 8 - Prob. 45BECh. 8 - Long-term asset costs and partial-year...Ch. 8 - Journalizing long-term asset transactions...Ch. 8 - Prob. 48APCh. 8 - Prob. 49APCh. 8 - Prob. 50APCh. 8 - Prob. 51APCh. 8 - Prob. 52APCh. 8 - Prob. 53BPCh. 8 - Journalizing long-term asset transactions...Ch. 8 - Prob. 55BPCh. 8 - Prob. 56BPCh. 8 - Prob. 57BPCh. 8 - Prob. 58BPCh. 8 - Prob. 59BPCh. 8 - Prob. 1CECh. 8 - Prob. 1CPCh. 8 - Continuing Financial Statement Analysis Problem...Ch. 8 - Prob. 1EIACh. 8 - Prob. 2EIACh. 8 - Financial Analysis Purpose: To help familiarize...Ch. 8 - Prob. 1IACh. 8 - Prob. 1SBACh. 8 - Written Communication A client of yours notified...
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