ACCT20100 Chapter Notes - Chapter 8: Ddb Worldwide

18 views2 pages

fuchsiahound508

4 Nov 2016

School

Department

Accountancy

Course

ACCT20100

Professor

Schmuhl

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Chapter 8: reporting and interpreting property, plant, and equipment; intangibles; and natural resources. Straight-line method most common (98% of companies use this: 2. Depreciation expense is constant amount each year. Accumulated depreciation increases by an equal amount each year. Net book value decreases by the same amount each year until it equals the estimated residual value. As a result, also known as accelerated depreciation: two-step process: Calculate the double-declining-balance depreciation rate by dividing 2 by the useful life in years. Determine depreciation expense by multiplying the double-declining-(cid:271)ala(cid:374)(cid:272)e (cid:396)ate ti(cid:373)es the asset"s beginning-of-the-period book value: rate= two times the straight-line rate and is termed the double-declining balance rate. If straight-line rate= 10% for 10 year estimated life, then the declining-balance rate is 20%. Equation includes accumulated depreciation, not residual value. Net book value should not be depreciated below the residual value.

Related Questions

25.Which of the following items does not affect the calculation of depreciation expense?

A.Economic benefits generated by the asset

B.Useful life of the asset

C.Residual value of the asset

D.Capitalized cost of the asset

26.Which of the following statements is correct when the straight-line method is used to compute depreciation?

A.The carrying value of an asset is a constant amount during the asset's useful life

B.Accumulated depreciation is a constant amount during the asset's estimated useful life

C.Depreciation Expense is a constant amount each year

D.The book value of an asset is an increasing amount during the asset's useful life

27.One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

A.reduces book value below residual value.

B.does not consider the useful life of the asset in the calculation of depreciation.

C.cannot be used for tax purposes.

D.uses book value instead of depreciable cost in the calculation of depreciation.

28.Why don't all companies use the same depreciation method?

A.US income tax regulations require that a company use the same depreciation method for both financial reporting and income taxes.

B.Different depreciation methods might better reflect the pattern in which assets' economic benefits are used.

C.All companies do use the same depreciation method.

D.Only large companies are allowed to use some of the more complicated depreciation methods.

Depreciation by Two Methods; Sale of Fixed Asset

New lithographic equipment, acquired at a cost of $800,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $90,000. The managerrequested information regarding the effect of alternative methodson the amount of depreciation expense each year. On the basis ofthe data presented to the manager, the double-declining-balancemethod was selected.

In the first week of the fifth year, the equipment was sold for$135,000.

Required:

1. Determine the annual depreciation expensefor each of the estimated five years of use, the accumulateddepreciation at the end of each year, and the book value of theequipment at the end of each year by the following methods:

a. Straight-line method

Year	DepreciationExpense	Accumulated Depreciation,End of Year	Book Value, End ofYear
1	$	$	$
2	$	$	$
3	$	$	$
4	$	$	$
5	$	$	$

b. Double-declining-balance method

Year	DepreciationExpense	Accumulated Depreciation,End of Year	Book Value, End ofYear
1	$	$	$
2	$	$	$
3	$	$	$
4	$	$	$
5	$	$	$

yellowworm651

New lithographic equipment, acquired at a cost of $875,000 atthe beginning of a fiscal year, has an estimated useful life offive years and an estimated residual value of $75,300. The managerrequested information regarding the effect of alternative methodson the amount of depreciation expense each year. On the basis ofthe data presented to the manager, the double-declining-balancemethod was selected.

In the first week of the fifth year, the equipment was sold for$128,100.

a. Straight-line method

Year

Depreciation Expense

Accumulated Depreciation End of Year

Book Value End of Year

1 ________________ ______________________ _____________________________

2 ________________ ______________________ _____________________________

3 ________________ ______________________ _____________________________

4 ________________ ______________________ _____________________________

5 ________________ ______________________ ____________________________

b. Double-declining-balance method

Year

Depreciation Expense

Accumulated Depreciation End of Year

Book Value End of Year

1 ________________ ______________________ _____________________________

2 ________________ ______________________ _____________________________

3 ________________ ______________________ _____________________________

4 ________________ ______________________ _____________________________

5 ________________ ______________________ ____________________________

2. Journalize the entry to record the sale, assumingdouble-declining balance method is used. If an amount box does notrequire an entry, leave it blank.

Cash __________ _______________

Accumulated Depreciation __________ _______________

Equipment __________ _______________

Gain On sale of equipment __________ _______________

3. Journalize the entry to record the sale, assuming that theequipment was sold for $110,000 instead of $128,100. If an amountbox does not require an entry, leave it blank.

Cash __________ _______________

Accumulated Depreciation __________ _______________

loss On sale of equipment __________ _______________

Equipment __________ _______________

chocolatescorpion968

ACCT20100 Chapter Notes - Chapter 8: Ddb Worldwide

Document Summary

Get access

Related Documents

ACCT20100 Chapter Notes - Chapter 8: Intangible Asset, European Cooperation In Science And Technology

ACCT20100 Chapter Notes - Chapter 8: Net Income, Unit

ACCT20100 Lecture Notes - Lecture 10: Deferral, Retained Earnings, Promissory Note

Related Questions