Question

Problem 9-7A Calculating depreciation LO2

Use the following table:

Big Sky Farms
Partial Balance Sheet
April 30, 2020
Property, plant and equipment:
Land				$	660,000
Building1	$	750,000
Less: Accumulated depreciation		550,000			200,000
Equipment2		500,000
Less: Accumulated depreciation		212,000			288,000
Total property, plant and equipment				$	1,148,000

¹The building was purchased on May 3, 2009, and is depreciated to the nearest whole month using the straight-line method. Depreciation is based on a 15-year life, after which it will be demolished and replaced with a new one.

²The equipment was purchased on November 3, 2017, and is depreciated to the nearest whole month using the double-declining-balance method. The total estimated useful life is 10 years with a residual value of $200,000.

Required:
1. Calculate and record depreciation for the year just ended April 30, 2021, for both the building and equipment.

2. Prepare the property, plant, and equipment section of the balance sheet at April 30, 2021. (Enter all amounts as positive values.)

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Answer 1

Big Sky Farms Requirement 1 Building Depreciation = (Cost - salvage Value) / life of asset = (750000 - 0)/15 50000 Equipment Depreciation = 2 x Straight-line depreciation rate x Book value at the beginning of the year 30.4.2018 = 2 x 1/10 x 500000 x 6/12 = 100000 x 6/12 = 50000 Double-declining balance (ceases when the book value = the estimated salvage value) Beg. Year Book Value Depreciation 30.4.2018 500000 50000 30.4.2019 450000 90000 30.4.2020 360000 72000 30.4.2021 288000 57600 30.4.2022 230400 30400 End. Book Value 450000 360000 288000 230400 200000 Requirement 2 660000 Partial Balance Sheet April 30, 2021 Property, plant and equipment: Land Buildingi Less: Accumulated depreciation Equipment2 Less: Accumulated depreciation Total property, plant and equipment 150000 750000 600000 500000 269600 230400 1040400 550000 + 50000 = 600000; 212000 + 57600 = 269600