Acct 550 Ch 11

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ACCT 550 Week 7 Homework Chapter 11: E11-4, E11-9, E11-11, E11-17 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. 279,000-15,000 = $264,000 / 10 yrs = $26,400 (b) Units-of-output. 264,000 / 240,000 units = $1.10 25,500 units x 1.10 = $28,050 (c) Working hours. 264,000 / 25,000 hrs = $10.56 2650 hrs x 10.56 = $27,984 (d) Sum-of-the-years’-digits. n(n+1) = 10(11) = 55 10/55 x 264,000 x 1/3 = $16,000 9/55 x 264,000 x 2/3 = $28,800 Total = $44,800 (e) Double-declining-balance. 279,000 x 20% x 1/3 = $18,600 [279,000-(279,000x20%)] x 20% x 2/3 = $29,760 Total = $48,360 E11-9 (Composite Depreciation) Presented below is information related to Morrow Manufacturing Corporation. Machine | Cost | Estimated Salvage Value | Estimated Life (in years) | A | $40,500 | $5,500 | 10 | B | 33,600 | 4,800 | 9 | C | 36,000 | 3,600 | 8 | D | 19,000 | 1,500 | 7 | E | 23,500 | 2,500 | 6 | Instructions (a) Compute the rate of depreciation per year to be applied to the machines under the composite method. A: 40,500/10=4050 B: 33,600/9=3733 C: 36,000/8=4500 D: 19,000/7=2714 E: 23,500/6=3916 Total Straight-line depreciation = $18,913 Total Cost = $152,600 Depreciation Rate = 18,913/152,600 = 12.4% (b) Prepare the adjusting entry necessary at the end of the year to record depreciation for the year. Depreciation – Plant Assets 18,913

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