AC550

Intermediate Accounting I

Week 7 Homework

Professor

Date Due:

Chapter 11: E 11-4, E 11-8, E 11-9, E 11-11, E 11-17, E 11-24, P 11-5

E11-4 (Depreciation Computations—Five Methods) Wenner Furnace Corp. purchased machinery for $279,000 on May 1, 2012. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and working hours of 25,000. During 2013, Wenner Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units.

Instructions

From the information given, compute the depreciation charge for 2013 under each of the following methods. (Round to the nearest dollar.)

(a) Straight-line.

(b) Units-of-output.

(c) Working hours.

(d) Sum-of-the-years’-digits.

(e) Double-declining-balance.

(a) $279,000 – $15,000 = $264,000; $264,000 ÷ 10 yrs. = $26,400

(b) $264,000 ÷ 240,000 units = $1.10; 25,500 units X $1.10 = $28,050

(c) $264,000 ÷ 25,000 hours = $10.56 per hr.; 2,650 hrs. X $10.56 = $27,984

(d) | 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55 OR | n(n + 1) | = | 10(11) | = 55 |

| | 2 | | 2 | |

10 | x $264,000 x 1/3 = | $16,000 |

55 | | |

9 | x $264,000 x 2/3 = | 28,800 |

55 | | |

| | |

Total for 2013 | $44,800 |

(e) | $279,000 x 20% x 1/3 = | $18,600 |

| | |

| [$279,000 – ($279,000 X 20%)] x 20% x 2/3 = | 29,760 |

| | |

| Total for 2013 | $48,360 |

E11-8 (Depreciation Computation—Replacement, Nonmonetary Exchange) Goldman Corporation bought a machine on June 1, 2010, for $31,800, f.o.b. the place of manufacture. Freight to the point where it was set up was $200, and $500 was expended to install it. The machine’s useful life was estimated at 10 years, with a salvage value of $2,500. On June 1, 2011, an essential part of the machine is replaced, at a cost of $2,700, with one designed to reduce the cost of operating the machine. The cost of the old part and related...