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Chapter 11: Q15E (page 587)
Andrea Torbert purchased a computer for \(8,000 on July 1, 2017. She intends to depreciate it over 4 years using the double-declining-balance method. Salvage value is \)1,000. Compute depreciation for 2018.
Depreciation for 2018 = $3,000
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Fernandez Corporation purchased a truck at the beginning of 2017 for \(50,000. The truck is estimated to have a salvage value of \)2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2017 and 31,000 miles in 2018. Compute depreciation expense for 2017 and 2018.
Presented below is information related to equipment owned by Pujols Company at December 31, 2017.
Cost (residual value \(0) | \)9,000,000 |
Accumulated depreciation to date | 1,000,000 |
Value-in-use | 5,500,000 |
Fair value less cost of disposal | 4,400,000 |
Assume that Pujols will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 8 years. Pujols uses straight-line depreciation.
Instructions
Distinguish among depreciation, depletion, and amortization.
Explain how gains or losses on impaired assets should be reported in income.
Neither depreciation on replacement cost nor depreciation adjusted for changes in the purchasing power of the dollar has been recognized as generally accepted accounting principles for inclusion in the primary financial statements. Briefly present the accounting treatment that might be used to assist in the maintenance of the ability of a company to replace its productive capacity.
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