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Chapter 11: Q12Q (page 583)
If Remmers, Inc. uses the composite method and its composite rate is 7.5% per year, what entry should it make when plant assets that originally cost \(50,000 and have been used for 10 years are sold for \)14,000?
No gain or loss is recognized under the composite method.
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(Depreciation Computation鈥擜ddition, Change in Estimate) In 1990, Herman Moore Company completed the construction of a building at a cost of \(2,000,000 and first occupied it in January 1991. It was estimated that the building will have a useful life of 40 years and a salvage value of \)60,000 at the end of that time.
Early in 2001, an addition to the building was constructed at a cost of \(500,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years and that the addition would have a life of 30 years and a salvage value of \)20,000.
In 2019, it is determined that the probable life of the building and addition will extend to the end of 2050, or 20 years beyond the original estimate.
Instructions
(Depreciation for Partial Periods鈥擲L, Act., SYD, and DDB) On January 1, 2015, a machine was purchased for \(90,000. The machine has an estimated salvage value of \)6,000 and an estimated useful life of 5 years. The machine can operate for 100,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 20,000 hours; 2016, 25,000 hours; 2017, 15,000 hours; 2018, 30,000 hours; and 2019, 10,000 hours.
Instructions
(a) Compute the annual depreciation charges over the machine鈥檚 life assuming a December 31 year-end for each of the following depreciation methods.
(b) Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset鈥檚 life applying each of the following methods.
(Depreciation Computations, SYD) Five Satins Company purchased a piece of equipment at the beginning of 2014. The equipment cost \(430,000. It has an estimated service life of 8 years and an expected salvage value of \)70,000. The sum of-the-years鈥�-digits method of depreciation is being used. Someone has already correctly prepared a depreciation schedule for this asset. This schedule shows that \(60,000 will be depreciated for a particular calendar year.
Instructions
Show calculations to determine for what particular year the depreciation amount for this asset will be \)60,000.
A building that was purchased on December 31, 2003, for $2,500,000 was originally estimated to have a life of 50 years with no salvage value at the end of that time. Depreciation has been recorded through 2017. During 2018, an examination of the building by an engineering firm discloses that its estimated useful life is 15 years after 2017. What should be the amount of depreciation for 2018?
(Impairment) Presented below is information related to equipment owned by Suarez Company at December 31, 2017.
Cost | \(9,000,000 |
Accumulated depreciation to date | 1,000,000 |
Expected future net cash flows | 7,000,000 |
Fair value | 4,800,000 |
Assume that Suarez will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 4 years.
Instructions
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