Homework Answers
1. Under straight line method,
Depreciation = ( Cost - salvage value) / useful life
Cost = $ 115,000.
Salvage value = $ 5,000
Useful life = 10 years.
Depreciation per annum = ( 115,000-5,000)/10
Depreciation per annum = 110,000/10
Depreciation per annum = $ 11,000 per year.
The equipment is purchased on October 1 of 2021. So it is used only 3 months in 2021 from October to December.
Depreciation for 2021 = (11,000/12)x 3
Depreciation for 2021 = $ 2,750.
Depreciation for 2022 = $ 11,000.
2. Under double declining method,
Depreciation = ( Book value /useful life) x 2
Depreciation = (115,000/10)x2
Depreciation = 23,000
Depreciation for 2021 = ( 23,000/12)x 3
Depreciation for 2021 = $ 5,750.
Book value as on January 1 of 2022 = 115,000 - 5,750
Book value as on January 1 of 2022 = 109,250
Depreciation for 2022 = (109,250/10)x 2
Depreciation for 2022 = $ 21,850.
3. Under units of production method,
Depreciation = [( Cost - salvage value) / total estimated units] x units produced during year.
Depreciation for 2021 = [ ( 115,000-5,000)/220,000] x 10,000
Depreciation for 2021 = ( 110,000/220,000)x 10,000
Depreciation for 2021 = $ 5,000.
Depreciation for 2022 = [ ( 115,000 - 5,000)/220,000] x 25,000
Depreciation for 2022 = $ 12,500.
SUMMARY:
1. Straight line method.
Depreciation for 2021 = $ 2,750
Depreciation for 2022 = $ 11,000
2. Double declining method.
Depreciation for 2021 = $ 5,750
Depreciation for 2022 = $ 21,850
3. Units of production.
Depreciation for 2021 = $ 5,000.
Depreciation for 2022 = $ 11,000.
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Chapters 10 and 11 [LO11-2]
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Depreciation
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$
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$
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41,000
Building
1,460,000
330,000
Equipment
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385,000
Automobiles
146,000
110,000
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Problem 11-3 (Algo) Depreciation methods; partial periods
Chapters 10 and 11 [LO11-2]
The plant asset and accumulated depreciation accounts of Pell
Corporation had the following balances at December 31,
2020:
Plant Asset
Accumulated
Depreciation
Land
$
330,000
$
0
Land improvements
174,000
41,000
Building
1,460,000
330,000
Equipment
1,118,000
385,000
Automobiles
146,000
110,000
Transactions during 2021 were as follows:
On January 2, 2021, equipment were purchased at a total invoice
cost of $240,000, which included a $5,100 charge for freight.
Installation...
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