Question

CHAPTER 2 The Balance Sheet 83 2.17. The Lazy Ranch just purchased equipmentine 0000. The equipment is expected to last five years and have no salvage value (a) Calculate the depreciation expense using the straight-line method for the first years the equipment is owned (b) Calculate the depreciation expen using the double-dedining balance method for the first two years the equipment is owned 2.18. Using the information below for Dean Corporation calculate the amount of dividends Dean most likely paid to common stockholders in 2013, 2014, and 2015. Year Year Net Income Retained Earnings Balances January 1, 2013 December 31, 2013 December 31, 2014 December 31, 2015 $ 700 890 1.045 1,010 2008 2009 2010 $250 225 2.19. From the following accounts, prepare a balance sheet for Chester Co. for the current calendar year. $ 1,400 34,000 12,400 7,000 1,600 1,500 Accrued interest payable Property, plant, and equipment Inventory Additional paid-in capital Deferred taxes payable (noncurrent) Cash Accumulated depreciation Bonds payable Accounts payable Common stock Prepaid expenses Land held for sale Retained earings Current portion of long-term debt Accounts receivable Notes payable 10,500 14,500 4,300 2,500 700 9.200 1,700 6,200 8,700 2.20. Writing Skills Problem. At fiscal year-end December 31, 2015, Shop World had the following assets and liabilities on its balance sheet (in millions): Current liabilities Long-term debt Other liabilities Total assets $9.459 12,330 1,180 37,411 Shop World reported the following information on leases in the notes to the financial statements: Total rent expense was $195 million in 2015, 5189 million in 2014, and $188 million in 2013. Most of the long-term leases include options to renew, with terms varying from 1 to 50 vears. Certain leases also include options to purchase the property

Answer 1

Solutions:

Calculation of Depreciation
Cost of Equipment	60000
Life expectancy	5
Depreciation per year (Straight Line)	= Cost of Equipment / Life expectancy
	=60000/5
	12000
Rate	=12000/60000
	20%

Under Straight Line Depreciation the Depreciation amount will be standard and will nor change
Year 1	12000
Year 2	12000
Year 3	12000
Year 4	12000
Year 5	12000
Total	60000

Double Declining Balance method
Depreciation rate (calculated above)	20%
Doubling this Straight Line Rate we get	40%

Year	Computation	Depreciation Expense	Accumulated Depreciation	Book Value
				60000
1	60000*40%	24000	24000	36000
2	36000*40%	14400	38400	21600