Chapter 9 Practice Problems

Topics: Generally Accepted Accounting Principles, Asset, Depreciation Pages: 5 (430 words) Published: December 4, 2014
Chapter 9 Practice Problems
S9-2.

Asset
Market
Value
Percentage of Total Value
× Total
Purchase
Price
= Assigned Cost of Each Asset
Land
$ 80,000
$80,000 / $160,000 = 50%
× $150,000
= $ 75,000
Building
60,000
$60,000 / $160,000 = 38%
× $150,000
= 57,000
Equipment
20,000
$20,000 / $160,000 = 12%
× $150,000
= 18,000
Total
$ 160,000
100%

$ 150,000

Date
Accounts and Explanation
Debit
Credit

Land
75,000

Building
57,000

Equipment
18,000

Notes Payable

150,000

To record purchase of land, building, and equipment in exchange for note payable.

S9-4.

Requirement 1

a.
Straight-line
=
(Cost − Residual value) / Useful life

=
($35,000,000 ̶ $5,000,000) / 5 years

=
$6,000,000 per year

b.
Depreciation per unit
=
(Cost – Residual value) / Useful life in units

=
($35,000,000 ̶ $5,000,000) / 6,000,000 miles

=
$5 per mile

Units-of-production
=
Depreciation per unit × Current year usage

=
$5 per mile × 1,000,000 miles

=
$5,000,000 for year 1

c.
Double-declining-balance
=
(Cost – Accumulated depreciation) × 2 × (1 / Useful life)

=
($35,000,000 ̶ $0) × 2 × (1/ 5 years)

=
$14,000,000 for year 1

S9-5.

a.
Straight-line
=
(Cost − Residual value) / Useful life

=
($35,000,000 ̶ $5,000,000) / 5 years

=
$6,000,000 per year, second year = $6,000,000

b.
Depreciation per unit
=
(Cost – Residual value) / Useful life in units

=
($35,000,000 ̶ $5,000,000) / 6,000,000 miles

=
$5 per mile

Units-of-production
=
Depreciation per unit × Current year usage

=
$5 per mile × 1,500,000 miles

=
$7,500,000 in year 2

c.
Double-declining-balance
=
(Cost – Accumulated depreciation) × 2 × (1 / Useful life)

=
($35,000,000 ̶ $0) × 2 × (1/ 5 years)

=
$14,000,000 in year 1

=
(Cost – Accumulated depreciation) × 2 × (1 / Useful life)

=
($35,000,000 ̶ $14,000,000) × 2 × (1/ 5 years)

=
$8,400,000 in year 2

S9-7.

Straight-line
=
(Cost − Residual value) / Useful life

=
($80,000 ̶ $8,000) /5 years

=
$14,400 per year

S9-8.

Straight-line
=
(Cost − Residual value) / Useful life

=
($50,000 ̶ $0) / 10 years

=
$5,000 per year

Accumulated depreciation after 4 years
=
$5,000 per year × 4 years

=
$20,000

Book value after 6 years
=
(Cost – Accumulated Depreciation)

=
$50,000 ̶ $20,000

=
$30,000

Revised depreciation
=
(Book value − Revised residual value) / Revised useful life remaining

=
($30,000 ̶ $0) / 2 years

=
$15,000 per year

Date
Accounts and Explanation
Debit
Credit
End of
Depreciation Expense—Equipment
15,000

Year 5
Accumulated Depreciation—Equip.

15,000

To record depreciation on equipment.

S9-9.

Market value of assets received

$ 28,000
Less: Book value of asset disposed of

Cost
$ 41,000

Less: Accumulated Depreciation
(20,000)
21,000
Gain or (Loss)

$ 7,000

Date
Accounts and Explanation
Debit
Credit
Dec. 31
Cash
28,000

Accumulated Depreciation—Equipment
20,000

Equipment

41,000

Gain on Disposal

7,000

Sold equipment for cash.

S9-11.

Requirement 1.

Units-of-production is the method used to compute depletion.

Requirement 2.

Depletion per unit
=
(Cost – Residual value) / Estimated total units

=
($24,000,000,000 ̶ $0) / 2,400,000,000 barrels

=
$10 per barrel

Depletion expense
=
Depletion per unit × Number of units extracted

=
$10 per barrel × 500,000,000 barrels

=
$5,000,000,000

Date
Accounts and Explanation
Debit
Credit
Dec. 31
Depletion Expense—Oil
5,000,000,000

Accumulated Depletion—Oil

5,000,000,000

To record depletion.

S9-12.

Requirement 1....
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