Chapter 5 Homework
Spring XXXXXXXXXXBUS2101 - Chapter 8 Homework
Homework should always be hand-written (do not type).
You are encouraged to use journal paper for journal entries (Questions 6 through 8).
Colors are optional, but encouraged, for this homework.
Question 1) On March 1, 2021, Amanda Company acquired real estate, on which it planned to construct a small
office building, by paying $97,000 in cash. An old warehouse on the property was demolished at a cost of
$28,288; the salvaged materials were sold for $5,777. Additional expenditures before construction began
included $1,009 attorney’s fee for work concerning the land purchase, $5,200 real estate
oker’s fee, $9,100
architect’s fee, and $17,000 to put in driveways and a parking lot.
Instructions:
A) Determine the amount to be reported as the cost of the land.
B) For each cost not used in part (a), indicate the account to be debited.
Question 2) Megan Company purchased a new machine on September 1, 2021, at a cost of $131,000. The
company estimated that the machine has a salvage value of $51,515, is expected to be used for 88,316 working
hours, and will have a 7-year life.
Instructions:
A) Compute the depreciation expense under the straight-line method for 2021, 2025, and 2028,
assuming a December 31 year-end.
B) Compute the depreciation expense under the double-declining balance method for 2021 and 2022.
Round the DDB percentage rate to 2 decimal places.
C) Compute the depreciation expense under the units-of-activity method for 2021, assuming machine
usage was 4,444 hours. (record depreciation per unit to the nearest cent.)
Question 3) In recent years, Do
s Company has purchased three machines. Because of a bad employee named
Wares in the accounting department, a different accountant was hired to take charge of selecting the
depreciation method for each machine. Information concerning the machines is summarized in the table below.
Machine Acquired Cost Salvage Useful Life Depreciation
XXXXXXXXXXValue(in years XXXXXXXXXXmethod
XXXXXXXXXXJan. 1, 2020 $96,000 $12,000 XXXXXXXXXX XXXXXXXXXXStraight-line
XXXXXXXXXXOct. 1, 2021 $85,000 $10,000 XXXXXXXXXX5 Double-Declining Balance
XXXXXXXXXXNov. 1, 2021 $66,000 $ 6,000 XXXXXXXXXX XXXXXXXXXXUnits-of-Activity
For the units-of-activity method, total machine hours are expected to be 30,000. Actual hours of use in the first 3
years were: 2021, 800; 2022, 4,500; and 2023, 7,000.
Instructions:
A) Compute the amount of accumulated depreciation on each machine at December 31, 2023.
B) If machine 2 was purchased on April 1 instead of October 1, what would be the depreciation expense
for this machine in 2021? In 2022?
Question 4) Patterson Bus Lines uses the units-of-activity method in depreciating its buses. One bus was
purchased on May 1, 2021, at a cost of $100,000. Over its 4-year useful life, the bus is expected to be driven
160,000 miles. Salvage value is expected to be $5,600.
Instructions: Prepare a depreciation schedule (as shown in class) assuming actual mileage was: 2021, 40,000;
2022, 52,000; 2023, 41,000; and 2024, 27,000.
Question 5) Grimes Corporation purchased machinery on January 1, 2021, at a cost of $250,000. The estimated
useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $30,000. The
company is considering different depreciation methods that could be used for financial reporting purposes.
Instructions:
A) Prepare separate depreciation schedules (as shown in class) for the machinery using the straight-line
method, and the double-declining balance method. (Round to the nearest dollar.)
B) Which method would result in the higher reported 2021 income? In the highest total reported income
over the 4-year period?
C) Which method would result in the lower reported 2021 income? In the lowest total reported income
over the 4-year period?
Question 6) Wang Co. has delivery equipment that cost $66,000 and has been depreciated $31,055.
Instructions: Record entries for the disposal under the following assumptions:
A) It was scrapped as having no value.
B) It was sold for $39,500.
C) It was sold for $22,222.
Question 7) Presented here are selected transactions for Hamid Company for 2021.
Jan. 1 Retired a piece of machinery that was purchased on January 1, 2011.
The machine cost $93,000 on that date and had a useful life of 10
years with no salvage value.
June 30 Sold a computer that was purchased on January 1, 2018. The
computer cost $30,000 and had a useful life of 6 years with no salvage
value. The computer was sold for $17,000.
Oct. 1 Discarded a delivery truck that was purchased on January 1, 2016.
The truck cost $34,200 and was depreciated based on an 8-year useful
life with a $3,000 salvage value.
Instructions: Journalize all entries required on the above dates, including entries to update depreciation, where
applicable, on assets disposed of. Hamid Company uses straight-line depreciation. (Assume depreciation is up to
date as of December 31, 2020)
Question 8) These are selected 2021 transactions for Darlene Corporation:
Apr. 1 Purchased copyright for $120,000. The copyright has a useful life of 8 years and a remaining
legal life of 30 years.
Sept. 1 Purchased a patent with an estimated useful life of 4 years and a legal life of 20 years for
$45,000.
Dec. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.
Instructions: Prepare all adjusting entries at December 31 to record amortization required by the events.