Question

L020 composite depreciation ur decimals (based on cost) and the composite life. California Utilities owns a power plant that Exercise 12-59 Recording Entries Using Composite consists of the following assets, all acquired on January 1, 2020. Cost Estimated Residual Value Estimated Life (Years) Depreciation Method L03 300,000 $10,000 0 5,000 Machinery 95,000 50,000 30 10 Required a. Compute the total straight-line depreciation for 2020 on all items combined. b. Compute the composite depreciation rate rounded to two decimals (based on cost) and the composite life of the plant. c. Provide the entry to record 2020 composite depreciation d. Assume that all of the Other equipment was sold in 2023 for $6,000 cash. Prepare the entry for the sale of that equipment.

Answer 1

LO3
a: Total Straight line depreciation:
	COST	SALVAGE	DEPRECIABLE VALUE	EST. LIFE	DEP. PER YEAR
BULD	300000	10000	290000	30	9666.67
MACHI	95000	0	95000	10	9500
OTHER EQ.	50000	5000	45000	6	7500
TOTAL DEPRECIATION					26666.67
b)
	COST	SALVAGE	DEPRECIABLE VALUE	EST. LIFE	DEP. PER YEAR
BULD	300000	10000	290000	30	9666.67
MACHI	95000	0	95000	10	9500
OTHER EQ.	50000	5000	45000	6	7500
TOTAL	445000.00	15000.00	430000.00		26666.67
COMPOSITE RATE = Total depreciation /Total cost = 26666.67/445000 = 0.0599
COMPOSITE LIFE = Total Depreciable cost / total depreciation per year = 430000/26666.67=16.125 years
c) journal entry:
	Accounts Titles	Debit	Credit
Debit	Depreciation Exp	26666.67
credit	Acc. Dep.		26666.67
	(being composite depreciation recorded)
d)
Debit	Acc. Dep	30000		7500*4
	cash	6000
	Loss on Sale	14000
	Other Equip		50000
	(being sale of other equip in 2023)