Accounting 220 Help Week 5- Chapter 10 & 11

week_5_chapter_10.xls

Home >Business & Finance homework help >Accounting homework help >Accounting 220 Help Week 5- Chapter 10 & 11

B-10.01

The following selected account balances were taken from the general ledger of Vance Corporation as of December 31, 20X7. Examine this information and prepare the property, plant & equipment section of the company's balance sheet. All accounts listed carry a normal balance.
	Land	$ 500,000
	Buildings	1,650,000
	Equipment	2,860,000
	Accumulated depreciation: Buildings	472,000
	Accumulated depreciation: Equipment	1,333,400
	Depreciation expense: Buildings	125,000
	Depreciation expense: Equipment	278,111

&R&"Myriad Web Pro,Bold"&20B-10.01

B-10.01

Worksheet B-10.01


	Property, Plant & Equipment

&L&"Myriad Web Pro,Bold"Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-10.01

B-10.01

B-10.02

Sonjay Motors recently purchased a new sign to be erected in front of its dealership. The sign company that produced the sign had a standard price for this item at $25,000, but Sonjay was able to negotiate a 20% discount from standard. In addition, the sign company paid $1,200 of freight costs to deliver the sign to Sonjay. Sonjay hired an electrician for $1,300 to wire the new sign's lighting. In addition, Sonjay rented a crane for $800 and paid an installation crew $1,600 to erect the sign. The city required Sonjay to pay a one-time sign inspection fee of $500. Furthermore, Sonjay had to obtain an annual permit at a cost of $50 for the first year. During installation, the crew accidentally damaged an adjoining neighbor's landscaping, and Sonjay paid $750 to clean and repair those problems.

Determine the correct cost allocation to the sign, and prepare a journal entry to reflect the total expenditures related to this acquisition.

B-10.02

Worksheet B-10.02

The sign cost is computed as follows:









	GENERAL JOURNAL
	Date	Accounts	Debit	Credit

B-10.02

B-10.03

Evaluate the following costs and decide if each is a "capital expenditure" or not. Then, if a capital expenditure, decide which account the cost should be recorded in: Land, Land Improvement, Building, or Equipment. The first item is done as an example.

Capital

Worksheet B-10.03

Capital

B-10.04

CityBank recently held an auction to dispose of various assets it had obtained through foreclosures and other loan settlements. Representatives of Advantage Metals attended the auction to bid on an abandoned manufacturing plant that CityBank included in the sale. The auction brochure listed the manufacturing plant as including all land, buildings, and equipment. The brochure indicated that an independent appraisal had been conducted and that land was separately valued at $1,000,000, the building at $2,000,000, and the equipment at $4,000,000. This information is believed to be reasonably accurate and fair.

Advantage Metals wanted the site for a recycling business it planned to start at the location. All of the equipment would be used in this new operation. The minimum bid price was set at $4,900,000. As it turned out, the auction was poorly attended. Advantage was only the only bidder on this property, and was fortunate to acquire the property at the opening bid minimum.

Determine the correct cost allocation to the land, buildings, and equipment, and prepare a journal entry to reflect this acquisition.

B-10.04

Worksheet B-10.04








GENERAL JOURNAL
Date	Accounts	Debit	Credit

B-10.04

B-10.05

Evaluate the following features or comments and decide if the description would pertain to a capital lease or an operating lease.
	Operating Lease	Capital Lease

The lessee reports the leased asset on its balance sheet		✓
Payments are reported fully as rent expense
Ownership of the property passes to the lessee by the end of the lease term
The lease term is at least 75% of the remaining life of the property
Interest expense is measured and reported by the lessee
Depreciation of the leased asset is not reported by the lessee
At the inception of the lease, the lessee records both an asset and liability
The lessee reports a liability for the present value of all future payments anticipated under the lease agreement
The lessor continues to report the tangible asset covered by the lease on its balance sheet

B-10.05

Worksheet B-10.05


	Operating Lease	Capital Lease

The lessee reports the leased asset on its balance sheet		✓
Payments are reported fully as rent expense
Ownership of the property passes to the lessee by the end of the lease term
The lease term is at least 75% of the remaining life of the property
Interest expense is measured and reported by the lessee
Depreciation of the leased asset is not reported by the lessee
At the inception of the lease, the lessee records both an asset and liability
The lessee reports a liability for the present value of all future payments anticipated under the lease agreement
The lessor continues to report the tangible asset covered by the lease on its balance sheet

B-10.05

B-10.06

On January 1, 20X3, Perkins Printing Corporation purchased a digital press for $1,450,000. It cost an additional $50,000 to deliver, install, and calibrate the press. This machine has a service life of 5 years, at which time it is expected that the device will be disposed of for a $100,000 salvage value.
Perkins uses the straight-line depreciation method.	`
(a)	Prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year.
(b)	Show how the asset and related accumulated depreciation would appear on a balance sheet at December 31, 20X5.
(c)	Prepare journal entries to record the asset's acquisition, annual depreciation for each year, and the asset's eventual sale for $100,000.

Worksheet B-10.06

(a)
Year	Annual Expense	Accumulated Depreciation at End of Year	Annual Expense Calculation

X3
X4
X5
X6
X7


(b)
	Property, Plant & Equipment (20X5)

	Equipment
	Less: Accumulated depreciation



(c)	GENERAL JOURNAL
	Date	Accounts	Debit	Credit
	1-Jan

		To record the purchase of press

	31-Dec
	20X3
		To record 20X3 depreciation

	31-Dec
	20X4
		To record 20X4 depreciation

	31-Dec
	20X5
		To record 20X5 depreciation

	31-Dec
	20X6
		To record 20X6 depreciation

	31-Dec
	20X7
		To record 20X7 depreciation

	31-Dec
	20X7

		To record disposal of asset

B-10.06

B-10.07

On January 1, 20X6, Outback Air purchased a new engine for one of its airplanes used to transport adventurers to remote regions of western Australia. The engine cost $750,000 and has a service life of 10,000 flight hours. Regulations require careful records of usage, and the engines must be replaced or rebuilt at the end of the 10,000 hour service period. Outback simply chooses to sell its used engines and acquire new ones. Used engines are expected to be resold for 1/3 of their original cost.
Outback uses the units-of-output depreciation method.	`
(a)	Assuming that the engine was used as follows, prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year. 20X6 1,500 hours 20X7 4,000 hours 20X8 3,000 hours 20X9 1,500 hours
(b)	Show how the asset and related accumulated depreciation would appear on a balance sheet at December 31, 20X7.
(c)	Prepare journal entries to record the asset's acquisition, annual depreciation for each year, and the asset's eventual sale for $250,000.

B-10.07

Worksheet B-10.07

(a)
Year	Annual Expense	Accumulated Depreciation at End of Year	Annual Expense Calculation

X6
X7
X8
X9


(b)
	Property, Plant & Equipment (20X7)

	Aircraft engine
	Less: Accumulated depreciation



(c)	GENERAL JOURNAL
	Date	Accounts	Debit	Credit
	1-Jan

		To record the purchase of engine

	31-Dec
	20X6
		To record 20X6 depreciation

	31-Dec
	20X7
		To record 20X7depreciation

	31-Dec
	20X8
		To record 20X8 depreciation

	31-Dec
	20X9
		To record 20X9 depreciation

	31-Dec
	20X9

		To record disposal of asset

B-10.07

B-10.08

On January 1, 20X1, Pagoda Pond Construction acquired a small excavator for $85,000. This device had a 4-year service life to Pagoda, at which time it is expected that the equipment will be sold for a $10,000 salvage value.
Pagoda uses the double-declining balance depreciation method.	`
(a)	Prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year.
(b)	Show how the asset and related accumulated depreciation would appear on a balance sheet at December 31, 20X3.
(c)	Prepare journal entries to record the asset's acquisition, annual depreciation for each year, and the asset's eventual sale for $10,000.

B-10.08

Worksheet B-10.08

(a)
Year	Annual Expense	Accumulated Depreciation at End of Year	Annual Expense Calculation

X1
X2
X3
X4


(b)
	Property, Plant & Equipment (20X3)

	Equipment
	Less: Accumulated depreciation



(c)	GENERAL JOURNAL
	Date	Accounts	Debit	Credit
	1-Jan

		To record purchase of excavator

	31-Dec
	20X1
		To record 20X1 depreciation

	31-Dec
	20X2
		To record 20X2 depreciation

	31-Dec
	20X3
		To record 20X3 depreciation

	31-Dec
	20X4
		To record 20X4 depreciation

	31-Dec
	20X4

		To record disposal of asset

B-10.08

B-10.09

On January 1, 20X1, Floral Features purchased a delivery truck for $65,000. At the time of purchase, Floral Features anticipated that it would use the truck for 4 years, even though its physical life is 8 years. At the end of the 4-year period, Floral believes it will be able to sell the truck for $35,000. Floral Features uses the straight-line depreciation method.
Gasoline prices increased significantly, and consumers began to buy more efficient vehicles. By early 20X3, it became apparent that the market for used delivery trucks like the one belonging to Floral Features was virtually nonexistent. Accordingly, Floral Features changed its plans and decided it would use the truck for its full 8-year life. At the end of the revised useful life, it is expected that the truck will be worth $2,000 for scrap value.	`
Prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year.

B-10.09

Worksheet B-10.09


Year	Annual Expense	Accumulated Depreciation at End of Year	Annual Expense Calculation

X1
X2
X3
X4
X5
X6
X7
X8

B-10.09

I-10.03

On January 1, 20X2, The GenKota Winery purchased a new bottling system. The system has an expected life of 5 years. The system cost $325,000. Shipping, installation, and set up was an additional $35,000. At the end of the useful life, Julie Hayes, chief accountant for GenKota, expects to dispose of the bottling system for $96,000. She further anticipates total output of 660,000 bottles over the useful life.
(a)	Assuming use of the straight-line depreciation method, prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year.
(b)	Assuming use of the units-of-output depreciation method, prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year. Actual output, in bottles, was 100,000 (20X2), 130,000 (20X3), 150,000 (20X4), 160,000 (20X5), and 120,000 (20X6).
(c)	Assuming use of the double-declining balance depreciation method, prepare a schedule showing annual depreciation expense, accumulated depreciation, and related calculations for each year.
(d)	Assuming use of the straight-line method, prepare revised depreciation calculations if the useful life estimate was revised at the beginning of 20X4, to anticipate a remaining useful life of 4 additional years (in other words, a total life of 6 years). The revised useful life was accompanied by a change in estimated salvage value to $54,400.

I-10.03

Worksheet I-10.03

(a) Straight-line
Year	Annual Expense	Accumulated Depreciation at End of Year	Annual Expense Calculation

X2
X3
X4
X5
X6


(b) Units of Output
Year	Annual Expense	Accumulated Depreciation at End of Year	Annual Expense Calculation

X2
X3
X4
X5
X6



(c) Double-declining balance
Year	Annual Expense	Accumulated Depreciation at End of Year	Annual Expense Calculation

X2
X3
X4
X5
X6


(d) Straight-line revised
Year	Annual Expense	Accumulated Depreciation at End of Year	Annual Expense Calculation

X2
X3
X4
X5
X6
X7

I-10.03

I-10.04

Grant Price is conducting an audit of the property, plant, and equipment records of Wellron Corporation. Grant selected two specific assets for closer inspection. Grant has examined documentation related to each asset's original purchase and compared it to the recorded cost, physically inspected the item to determine that it is still in the possession of the company, and conducted other similar assurance procedures.

The final step in the audit of these accounts is to test the calculations of depreciation expense and accumulated depreciation. Grant has asked you to perform this final procedure for 20X8. Below is a schedule of the two assets, with the depreciation values determined by Wellron. The building was depreciated by the straight-line method, and the truck by the double-declining balance method. Determine if the indicated depreciation values are correct.

Item

Cost

Purchase Date

Service Life

Salvage Value

Depreciation Expense for 20X8

Accumulated Depreciation at 12/31/X8

Building

$ 1,200,000

July 1, 20X1

25 years

$ 400,000

$ 32,000

$ 256,000

Truck

$ 80,000

Oct. 1, 20X6

8 years

$ 5,000

$ 13,184

$ 35,449

I-10.04

Worksheet I-10.04

Building:

Truck:

I-10.04