Question

She is i Data Table On the num! use for Estimated Life Estimated Residual Value Depreciation Method* Monthly Depreciation Expense $ 160 Estil Asset $ 4 years $ 0 SL va n/a Acquisition Date Nov. 3, 2018 Dec. 1, 2018 Dec. 1, 2018 Dec. 2. 2018 Mar. 2, 2019 Mar. 3, 2019 Canoes Land Building Canoes Computer Office Furniture Cost 7,680 85,000 225,000 9,600 6,300 10,900 SL 900 200 20 years 4 years 7 years 10 years 9,000 0 600 1,300 SL DDB SL cember d in service the asse d: Accur SL = Straight-line: DDB = Double-declining-balance Accum. Depr. Dec. 31, Print Done Done 2019 2019 in 20 2019 2019

Answer 1

Solution

Tree Top Company

1. Computation of monthly depreciation expense for the computer and the office furniture for 2019:

Asset	Acquisition Date	Cost	Estimated Life	Estimated Residual Value	Depreciation Method	Year 1 - Monthly Depreciation Expense
Computer	Mar 2, 2019	$6,300	7 years	$600	DDB	$150
Office Furniture	Mar 3, 2019	$10,900	10 years	$1,300	SL	$80

• Monthly depreciation expense for the computer:

Depreciation method DDB

Annual depreciation expense = cost x DDB rate

DDB rate = 200% straight line depreciation rate

Straight line depreciation rate = 1/useful life

Useful life = 7 years

Straight line depreciation rate = 1/7 = 14.29%

DDB rate = 200% x 14.29% = 28.57%

Cost = $6,300

Annual depreciation = 6,300 x 28.57% = 1,800

Monthly depreciation expense = 1,800/12 months =$150

Monthly depreciation expense for the computer in 2019 = $150

• Monthly depreciation expense for the office furniture –

Depreciation method – SL

Annual depreciation expense = depreciable base x straight line rate

Depreciable base = cost – residual value

Cost = $10,900

Estimated residual value = $1,300

Depreciable base = 10,900 – 1,300 = $9,600

Straight line depreciation rate = 1/10 years = 10%

Annual depreciation expense = 9,600 x 10% = $960

Monthly depreciation expense = 960/12 months = $80

Monthly depreciation expense for the office furniture in 2019 = $80

2. Book value for each asset as on December 31, 2018:

Asset	Acquisition Date	Cost	2018 Depreciation Expense	Accumulated Depreciation, December 31, 2018	Book Value, December 31, 2018	2019 Depreciation expense through June 30	Accumulated Depreciation June 30, 2019	Book Value June 30, 2019
Canoes	Nov 3, 2018	$7,680	$320	$320	$7,360	$960	$1,280	$6,400
Land	Dec 1, 2018	$85,000	-	-	$85,000	-	-	$85,000
Building	Dec 1, 2018	$225,000	$900	$900	$224,100	$5,400	$6,300	$218,700
Canoes	Dec 2, 2018	$9,600	$200	$200	$9,400	$1,200	$1,400	$8,200
Computer	Mar 2, 2019	$6,300	-	-	-	$600	$600	$5,700
Office Furniture	Mar 3, 2019	$10,900	-	-	-	$320	$320	$10,580

Computations:

Book value = cost – accumulated depreciation

• Canoes

Annual Depreciation expense using SL method,

= (7,680 – 0)/4 years = $1,920

Monthly depreciation expense = 1,920/12 = $160

Accumulated Depreciation, December 31, 2018 = 2 months x $160 = $320

Book value = 7,680 – 320 = $7,360

Book value at December 31, 2018 = $7,360

Depreciation expense for the first 6 months in 2019 –

Depreciation expense = $160 x 6 = $960

Accumulated depreciation, June 30, 2019 = $320 + $960 = $1,280

Book value = $7,680 – 1,280 = $6,400

Book value of Canoes, June 30, 2019 = $6,400

• Land

Land is non-depreciable asset.

Its book value as on June 30, 2019 = cost = $85,000

-Building

Book value at December 31, 2018 = cost – accumulated depreciation

Cost = $225,000

Accumulated depreciation = $900

Book value = 225,000 – 900 = 224,100

Depreciation expense for the 6 months in 2019, as at June 30, 2019

Monthly depreciation expense x 6 = $900 x 6 = $5,400

Book value at June 30, 2019 = 225,000 – (900 + 5,400) = $218,700

• Canoes

Book value at December 31, 2018 = cost – accumulated depreciation

Cost = $9,600

Accumulated depreciation = $200

Book value at December 31, 2018 = 9,600 – 200 = $9,400

Depreciation expense for the first 6 months in 2019,

= $200 x 6 = $1,200

Book value, June 30, 2019 = 9,600 – (200 + 1,200) = $8,200

Book value, Canoes at June 30, 2019 = $8,200

• Computer

Book value at December 31, 2018 = 0

As the asset was not purchased at that date.

Monthly depreciation expense = $150 (computed in 1. Above)

Depreciation expense, June 30, 2019 = 4 months depreciation (March through June)

= $150 x 4 = $600

Book value = cost – accumulated depreciation

= $6,300 - $600 = $5,700

• Office Furniture

Book value at December 31, 2018 = 0

As the asset was not purchased at that date.

Monthly depreciation expense = $80 (computed in 1. Above)

Depreciation expense, June 30, 2019 = 4 months depreciation (March through June)

= $80 x 4 = $320

Book value = cost – accumulated depreciation

Book value, June 30, 2019 = 10,900 – 320 = $10,580

3. Partial balance sheet showing Property, Plant and Equipment at June 30, 2019:

Tree Top Company
Balance Sheet (Partial) at June 30, 2019
Property, Plant and Equipment
Land			$85,000
Building	$225,000
Accumulated Depreciation	$6,300		$218,700
Equipment -
Canoes	$17,280
Less: Accumulated depreciation	$2,680	$14,600
Computer	$6,300
Less: Accumulated depreciation	$600	$5,700
Office Furniture	$10,900
Less: Accumulated depreciation	$320	$10,580	$30,880
Total Property, Plant and Equipment			$334,580

Note: Canoes purchased at different dates is shown as single item.

Canoes cost = 7,680 + 9,600 = $17,280

Accumulated depreciation = $1,280 + $1,400 = $2,680