Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 9, Problem 1CP
Computing Acquisition Cost and Recording
At the beginning of the year. Young Company bought three used machines from Vince, Inc. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts.
By the end of the first year, each machine had been operating 7,000 hours.
Required:
- 1. Compute the cost of each machine. Explain the rationale for capitalizing or expensing the various costs.
- 2. Give the
journal entry to record depreciation expense at the end of year 1, assuming the following:
TIP: Remember that the formula for double-declining-balance uses cost minus
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Copy equipment was acquired at the beginning of the year at a cost of $38,660 that has an estimated residual value of $3,500 and an estimated useful life of 5 years. It is estimated
that the machine will output an estimated 1,172,000 copies. This year, 270,000 copies were made.
a. Determine the depreciable cost.
b. Determine the depreciation rate. Round your answer to two decimal places.
per copy
c. Determine the units-of-output depreciation for the year.
Previous
Next
Copy equipment was acquired at the beginning of the year at a cost of $33,150 that has an estimated residual value of $3,000 and an estimated useful life of 5 years. It is estimated that the machine will output an estimated 1,005,000 copies. This year, 232,000 copies were made.
a. Determine the depreciable cost.$fill in the blank 1
b. Determine the depreciation rate. Round your answer to two decimal places.$fill in the blank 2 per copy
c. Determine the units-of-output depreciation for the year.$fill in the blank 3
Copy equipment was acquired at the beginning of the year at a cost of $21,500 that has an estimated residual value of $2,000 and an
estimated useful life of 5 years. It is estimated that the machine will output an estimated 975,000 copies. This year, 265,000 copies were
made.
a. Determine the depreciable cost.
$
b. Determine the depreciation rate. Round your answer to two decimal places.
$
per copy
c. Determine the units-of-activity depreciation for the year.
Chapter 9 Solutions
Fundamentals Of Financial Accounting
Ch. 9 - Define long-lived assets. What are the two common...Ch. 9 - Under the cost principle, what amounts should be...Ch. 9 - What is the term for recording costs as assets...Ch. 9 - 4. Waste Management, Inc., regularly incurs costs...Ch. 9 - Distinguish between ordinary repairs and...Ch. 9 - Describe the relationship between the expense...Ch. 9 - Why are different depreciation methods allowed?Ch. 9 - In computing depreciation, three values must be...Ch. 9 - Prob. 9QCh. 9 - After merging with Northwest Airlines, Delta...
Ch. 9 - A local politician claimed, to reduce the...Ch. 9 - What is an asset impairment? How is it accounted...Ch. 9 - What is book value? When equipment is sold for...Ch. 9 - Prob. 14QCh. 9 - Prob. 15QCh. 9 - FedEx Corporation reports the cost of its aircraft...Ch. 9 - Prob. 17QCh. 9 - Prob. 18QCh. 9 - (Supplement 9A) How does depletion affect the...Ch. 9 - (Supplement 9B) Over what period should an...Ch. 9 - Prob. 1MCCh. 9 - Prob. 2MCCh. 9 - Prob. 3MCCh. 9 - A company wishes to report the highest earnings...Ch. 9 - Barber, Inc., depreciates its building on a...Ch. 9 - Thornton Industries purchased a machine on July 1...Ch. 9 - ACME. Inc., uses straight-line depreciation for...Ch. 9 - What assets should be amortized using the...Ch. 9 - Prob. 9MCCh. 9 - The Simon Company and the Allen Company each...Ch. 9 - Classifying Long-Lived Assets and Related Cost...Ch. 9 - Prob. 2MECh. 9 - Prob. 3MECh. 9 - Computing Book Value (Straight-Line Depreciation)...Ch. 9 - Computing Book Value (Units-of-Production...Ch. 9 - Computing Book Value (Double-Declining-Balance...Ch. 9 - Calculating Partial-Year Depreciation Calculate...Ch. 9 - Recording Asset Impairment Losses After recording...Ch. 9 - Recording the Disposal of a Long-Lived Asset...Ch. 9 - Reporting and Recording the Disposal of a...Ch. 9 - Prob. 11MECh. 9 - Prob. 12MECh. 9 - Computing and Evaluating the Fixed Asset Turnover...Ch. 9 - (Supplement 9A) Recording Depletion for a Natural...Ch. 9 - Prob. 15MECh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Determining Financial Statement Effects of an...Ch. 9 - Prob. 4ECh. 9 - Determining Financial Statement Effects of...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Prob. 8ECh. 9 - Demonstrating the Effect of Book Value on...Ch. 9 - Evaluating the Impact of Estimated Useful Lives of...Ch. 9 - Calculating the Impact of Estimated Useful Lives...Ch. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Computing and Interpreting the Fixed Asset...Ch. 9 - Computing Depreciation and Book Value for Two...Ch. 9 - Prob. 16ECh. 9 - Prob. 17ECh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Prob. 2CPCh. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Prob. 3PACh. 9 - Prob. 4PACh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Prob. 4PBCh. 9 - Accounting for Operating Activities (Including...Ch. 9 - Prob. 1SDCCh. 9 - Prob. 2SDCCh. 9 - Ethical Decision Making: A Mini-Case Assume you...Ch. 9 - Critical Thinking: Analyzing the Effects of...Ch. 9 - Prob. 7SDCCh. 9 - Accounting for the Use and Disposal of Long-Lived...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Loban Company purchased four cars for 9,000 each and expects that they will be sold in 3 years for 1,500 each. The company uses group depreciation on a straight-line basis. Required: 1. Prepare journal entries to record the acquisition and the first years depreciation expense. 2. If one of the cars is sold at the beginning of the second year for 7,000, what journal entry is required?arrow_forwardWhen depreciation is recorded each period, what account is debited? a. Depreciation Expense b. Cash c. Accumulated Depreciation d. The fixed asset account involved Use the following information for Multiple-Choice Questions 7-4 through 7-6: Cox Inc. acquired a machine for on January 1, 2019. The machine has a salvage value of $20,000 and a 5-year useful life. Cox expects the machine to run for 15,000 machine hours. The machine was actually used for 4,200 hours in 2019 and 3,450 hours in 2020.arrow_forwardCopy equipment was acquired at the beginning of the year at a cost of $25,200 that has an estimated residual value of $2,300 and an estimated useful life of 5 years. It is estimated that the machine will output an estimated 1,145,000 copies. This year, 246,000 copies were made. a. Determine the depreciable cost. b. Determine the depreciation rate. Round your answer to two decimal places. per copy c. Determine the units-of-activity depreciation for the year. LA ?arrow_forward
- At the beginning of the year. Grillo Industries bought three used machines. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Details for Machine A are provided below. Cost of the asset Installation costs Renovation costs prior to use Repairs after production began $9,000 800 600 500 4. Compute year 2 units-of-production depreciation expense for Machine B, assuming a capitalized cost of $42,000, an estimated life of 30,000 hours, $4,500 residual value, and actual year 2 use of 8,000 hours. (Do not round intermediate calculations.) Year 2 units-of-production depreciation expense 4arrow_forwardDepreciation Choices and Outcome. Mulligan Co. purchased a new machine on January 1. The following information pertains to the purchase: Life of asset Salvage value Purchase price Sales tax Freight cost Electrical set-up Custom programming Estimated annual labor savings Additional revenue generated a. Determine the capitalized cost of the new machine $84600 b. Compute annual depreciation, accumulated depreciation and the machine's book value for the first three year assuming: i. Straight-line depreciation ii. Double-declining-balance method Year 1 Year 2 Year 3 Straight-Line Depreciation Double-Declining Balance Depreciation Accumulated Book Value at Depreciation Accumulated Book Value at Expense Depreciation Year-end Expense Depreciation Year-End $ 5 years $9,000 54,000 3,000 2,400 2,100 1,500 10,500 24,000 0 $ 0 0 Straight-line $ Double-declining $ 0 0 0 0 0 $ 0 $ 0 0 i. Straight-line depreciation ii. Double-declining balance method Do not use negative signs with your answers below.…arrow_forwardBecker Office Service purchased a new computer system on January 1 Year 1 for $36.100. It is expected to have a five-year useful life and a $3,800 salvage value. Becker Office Service expects to use the computer system more extensively in the early years of its life. Required: a. Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation. b. Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation. d. Assume that Becker Office Service sold the computer system at the end of the fourth year for $20.500, Compute the amount of gain or loss using each depreciation method. Complete this question by entering your answers in the tabs below. Required A Required B Year 1 2 Calculate the depreciation expense for each of the five years, assuming the use of double-declining balance depreciation. (Enter all amounts as positive values. Do not found intermediate calculations. Round your…arrow_forward
- Determining asset cost, preparing depreciation schedules (3 methods), and identifying depreciation results that meet management objectives On January 3, 2018, Rapid Delivery Service purchased a truck at a cost of $100,000. Before placing the truck in service, Rapid spent $3,000 painting it, $600 replacing tires, and $10,400 overhauling the engine. The truck should remain in service for five years and have a residual value of $12,000. The truck’s annual mileage is expected to be 32,000 miles in each of the first four years and 8,000 miles in the fifth year—136,000 miles in total. In deciding which depreciation method to use, Andy Sargeant, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance). Requirements Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulated depreciation, and asset book value. Rapid prepares financial…arrow_forwardBecker Office Service purchased a new computer system on January 1, Year 1, for $33,400. It is expected to have a five-year useful life and a $3,700 salvage value. Becker Office Service expects to use the computer system more extensively in the early years of its life. Required a. Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation. b. Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation. d. Assume that Becker Office Service sold the computer system at the end of the fourth year for $20,500. Compute the amount of gain or loss using each depreciation method. Complete this question by entering your answers in the tabs below. Required A Required B Required D Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation. Note: Enter all amounts as positive values. Do not round intermediate calculations.…arrow_forwardAt the beginning of the year, Grillo Industries bought three used machines. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Details for Machine A are provided below. Cost of the asset Installation costs Renovation costs prior to use Repairs after production began 6. Compute years 1 and 2 double-declining-balance depreciation expense for Machine C, which has a cost of $25,400, an estimated life of 10 years, and $1,400 residual value. Double-declining balance Year 1 $9,000 800 600 500 Year 2arrow_forward
- Becker Office Service purchased a new computer system in Year 1 for $36,400. It is expected to have a five-year useful life and a $3,700 salvage value. The company expects to use the system more extensively in the early years of its life. Required a. Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation. b. Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation. d. Assume that Becker Office Service sold the computer system at the end of the fourth year for $18,000. Compute the amount of gain or loss using each depreciation method. Complete this question by entering your answers in the tabs below. Required A Required B Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation. Depreciation Expense Year 1 2 3 4 LO Required D 5arrow_forwardCopy equipment was acquired at the beginning of the year at a cost of $62,460 that has an estimated residual value of $5,700 and an estimated useful life of 5 years. It is estimated that the machine will output an estimated 946,000 copies. This year, 267,000 copies were made. a. Determine the depreciable cost. b. Determine the depreciation rate. per copy c. Determine the units-of-output depreciation for the year.arrow_forwardAt the beginning of the year, Patrick Company acquired a computer to be used in its operations. The computer was delivered by the supplier, installed by Patrick, and placed into operation. The estimated useful life of the computer is five years, and its estimated residual value is significant. Required: 1. a. What costs should Patrick capitalize for the computer? b. What is the objective of depreciation accounting? 2. What is the rationale for using accelerated depreciation methods?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Asset impairment explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=lWMDdtHF4ZU;License: Standard Youtube License