HomeworkLib
Question
Answers to problem 9.3A

u CheExplain Smart Hardware purchased new shelving for its store on April 1, 2011. The shelving is expected to have a 20-year life and no residual value. The following expenditures were associated with the purchase: thods Freight charges . . Sales taxes.... Installation of shelving .. 2,700 Cost to repair shelf damaged during installation....... 520 780 400 Instructions Compute depreciation expense for the years 2011 through 2013 under each depreciation a. method listed below: 1. Straight-line, with fractional years rounded to the nearest whole month. 2. 200 percent declining-balance, using the half-year convention. 3. 150 percent declining-balance, using the half-year convention. mart Hardware has two conflicting objectives. Management wants to report the highest pos sible earnings in its financial statements, yet it also wants to minimize its taxable income reported to the IRS. Explain how both of these objectives can be met. c. Which of the depreciation methods applied in part a resulted in the lowest reported book value at the end of 2014? Is book value an estimate of an assets fair value? Explain.
Chapter 9 Plant and Intangible Assets d. Assume that Smart Hardware sold the old shelving that was being replaced. The old sh had originally cost $9,000. Its book value at the time of the sale was $400. Rec the old shelving under the following conditions: 1. The shelving was sold for $1,200 cash. 2. The shelving was sold for $200 cash.
business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

✔ Recommended Answer
Answer #1

Requirement-(a Costs to be depreciated include Cost of shelving Freight charges Sales taxes Installation Total cost to be depreciated $12,000 $520 $780 $2,700 $16,000 1) Straight-Line Schedule (nearest whole month Dep. Calculation Dep. Exps. Accum. Dep. Book value Year 2011 ($16,000/ 20) x 9/12 2012 $16,000/20 2013 $16,000/20 2014 $16,000/20 $600 $800 $800 $800 $600 $1,400$14,600 $2,200 $3,000 $13,000 $15,400 $13,800 2) 200% Declining-Balance (half-year convention Dep. Calculation $16,000/20 x 2 x 1/2 $15,200/20 x 2 $13,680/20 x 2 $12,312/20 x 2 Dep. Exps. Accum. Dep. Book value Year 2011 2012 2013 2014 $800 $1,520 $1,368 $1,231 $800 $2,320 $3,688 $12,312 $4,919 $11,081 $15,200 $13,6803) 150% Declining-Balance (half-year convention Dep. Calculation $16,000/20 x 1.5 x 1/2 $15,400/20 x 1.5 $14,245/20 x 1.5 $13,177/20 x 1.5 Dep. Exps. Accum. Dep. Book value Year 2011 2012 2013 2014 $600 $1,155 $1,068 $988 $600 $1,755 $14,245 $2,823 $13,177 $3,811 $12,189 $15,400 Requirement-(bl: Smart Industries may use straight-line depreciation method in its books of accounts over assets early useful life but use MACRS depreciation method in its federal income tax return as much as possible in the early years of the shelvings useful life. As a result, Smart industries goals are really not in conflict. Requirement- Though 200% declining-balance method results in the lowest reported book value at the end of 2014 ($11,081), depreciation is not a process of valuation. As a result, S11,081 book value is not an estimate of the shelvings fair value at the end of 2014Requirement-(d Cost of shelving machine purchased originally Less: Book value as on the date of disposal Accumulated depreciation till date of disposal $9,000 $400 $8,600 Scenario General Journal Debit Credit $1,200 $8,600 1) Cash [Sale value given] [As calculated above] Accumulated depreciation $9,000 [Cost of the asset disposed] Shelving machine Gain on disposal of asset 800 [Bal. Fig. --> $1,200$8,600 $9,000] $200 $8,600 $200 2) Cash Accumulated depreciation Loss on disposal of asset [Sale value given] [As calculated above] [Bal. Fig>$9,000- $8,600 - $200] Shelving machine $9,000 [Cost of the asset disposed]

3 0
Add a comment
Know the answer?
Add Answer to:
Answers to problem 9.3A u CheExplain Smart Hardware purchased new shelving for its store on April...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • Need answers to problem 9.3A BLEM 9.3A s Involving Smart Hardware purchased new shelving for its...

    Need answers to problem 9.3A BLEM 9.3A s Involving Smart Hardware purchased new shelving for its store on April 1, 2011. The shelving is expeced to have a 20-year life and no residual value. The following expenditures were associated with the purchase: eciatiun Methods Cost of the shelving Freight charges $12,000 .. . . 780 Installation of shelving Cost to repair shelf damaged during installation 2,700 400 Instructions method listed below: 1. Straight-line, with fractional years rounded to the nearest...

  • 09-2, L09-3, L09.5 son, DDS, purchased new furniture for its store on May 1, 2018. The furniture is expected...

    09-2, L09-3, L09.5 son, DDS, purchased new furniture for its store on May 1, 2018. The furniture is expected to have a 10-year life and no residual value. The followin d itures were associated with the purchase. MARLEM 9.3B involving Alternative cution Methods Cost of the furniture .. Freight charges... Sales taxes Installation of furniture. Cost to repair furniture damaged during installation ....... $11,000 375 550 75 400 Instructions . Compute depreciation expense for the years 2018 through 2021 under...

  • JoJo Limited ("JoJo") purchased a machinery for its plant on 1 May 2017. The machinery is...

    JoJo Limited ("JoJo") purchased a machinery for its plant on 1 May 2017. The machinery is expected to have a 10-year life and no residual value. The following expenditures were associated with the purchase: Cost of the machinery Freight-in charges Commission fees Legal title fees Sales taxes Essential set-up charges Cost to repair machinery damaged during installation 100,000 3,750 6,000 9,250 5,500 1,500 800 JoJo adopts the cost model as its accounting policy in subsequently measuring its property, plant and...

  • Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at...

    Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $109,000. The machine’s estimated useful life at the time of the purchase was five years, and its residual value was $9,000. The company reports on a calendar year basis. Required: a-2. Prepare a complete depreciation schedule, beginning with the current year, using the 200 percent declining-balance method. (Assume that the half-year convention is used). a-3. Prepare a complete depreciation schedule, beginning...

  • Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at...

    Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $118,000. The machine's estimated useful life at the time of the purchase was five years, and its residual value was $8,000. The company reports on a calendar year basis. Required: a-1. Prepare a complete depreciation schedule, beginning with the current year, using the straight-line method. (Assume that the half-year convention is used). a-2. Prepare a complete depreciation schedule, beginning with the...

  • Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost ...

    Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $109,000. The machine’s estimated useful life at the time of the purchase was five years, and its residual value was $9,000. The company reports on a calendar year basis. Required: a-2. Prepare a complete depreciation schedule, beginning with the current year, using the 200 percent declining-balance method. (Assume that the half-year convention is used). a-3. Prepare a complete depreciation schedule, beginning...

  • Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $130,000. The machin...

    Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $130,000. The machine’s estimated useful life at the time of the purchase was five years, and its residual value was $10,000. The company reports on a calendar year basis. Required: a-1. Prepare a complete depreciation schedule, beginning with the current year, using the straight-line method. (Assume that the half-year convention is used). a-2. Prepare a complete depreciation schedule, beginning with the...

  • I vietiiuUS Chan Ltd, purchased new furniture for its store on 1 May 2013. The furniture...

    I vietiiuUS Chan Ltd, purchased new furniture for its store on 1 May 2013. The furniture is expected to have a year me and with 20.00e residual value. The following expenditures were associated with the purchase: Cost of the furniture $90,000 cost = 70.000+ Freight charges 5,000 1500+3 -96.400 Sales taxes 3,500 Installation of furniture 1,500 Chan Ltd adopts the cost model as its accounting policy in subsequently measuring its property, plant, and equipment. Instructions a. Compute depreciation expense for...

  • 16 marks) Wulston 334 marks) Better Life Hospital purchased an X-ray machine on 3 April 2019...

    16 marks) Wulston 334 marks) Better Life Hospital purchased an X-ray machine on 3 April 2019 at a cost of $405 The estimated useful life of this machine was five years and estimated residual van imated residual value was $24,000. The management estimates that the machine can take 300,000 pictures during the useful life. Workings are required for the answers below. (a) Compute the depreciation expense of the X-ray machine at the year-end on 31 December for 2019 and 2020...

  • On April 30, 2009, Tilton Products purchased machinery for $264,000. The useful life of this machinery...

    On April 30, 2009, Tilton Products purchased machinery for $264,000. The useful life of this machinery is estimated at 8 years, with an $24,000 residual value. value: 3.00 points Refer to the information above. Assume that in its financial statements, Tilton Products uses straight-line depreciation and the half-year convention. Depreciation expense recognized on this machinery in 2009 and 2010 will be: O $22,500 in 2009 and $33,000 in 2010. $18,000 in 2009 and $36,000 in 2010. $15,000 in 2009 and...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT