Week 8 Homework
Question # 1
Martinez Company acquired a plant asset at the beginning of Year 1. The asset has an estimated service life of 5 years. An employee has prepared depreciation schedules for this asset using three different methods to compare the results of using one method with the results of using other methods. You are to assume that the following schedules have been co
ectly prepared for this asset using (1) the straight-line method, (2) the sum-of-the-years'-digits method, and (3) the double-declining-balance method.
Yea
Straight-Line
Sum-of-the-
Years'-Digits
Double-Declining-
Balance
1
$11,520
$19,200
$25,600
2
11,520
15,360
15,360
3
11,520
11,520
9,216
4
11,520
7,680
5,530
5
11,520
3,840
1,894
Total
$57,600
$57,600
$57,600
Answer the following questions.
Part 1
What is the cost of the asset being depreciated?
Cost of asset
$
Question # 2
Presented below is information related to equipment owned by Splish Company at December 31, 2017.
Cost
$9,810,000
Accumulated depreciation to date
1,090,000
Expected future net cash flows
7,630,000
Fair value
5,232,000
Splish intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $21,800. As of December 31, 2017, the equipment has a remaining useful life of 4 years.
Part 1
Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31
enter an account title to record the transaction on December 31, 2017
enter a debit amount
enter a credit amount
enter an account title to record the transaction on December 31, 2017
enter a debit amount
enter a credit amount
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Prepare the journal entry (if any) to record depreciation expense for 2018. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
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he asset was not sold by December 31, 2018. The fair value of the equipment on that date is $5,777,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $21,800. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31
enter an account title to record the transaction on December 31, 2018
enter a debit amount
enter a credit amount
enter an account title to record the transaction on December 31, 2018
enter a debit amount
enter a credit amount
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Question #3
Vaughn Company owns 9,000 acres of timberland purchased in 2006 at a cost of $1,694 per acre. At the time of purchase, the land without the timber was valued at $484 per acre. In 2007, Vaughn built fire lanes and roads, with a life of 30 years, at a cost of $101,640. Every year, Vaughn sprays to prevent disease at a cost of $3,630 per year and spends $8,470 to maintain the fire lanes and roads. During 2008, Vaughn selectively logged and sold 847,000 board feet of timber, of the estimated 4,235,000 board feet. In 2009, Vaughnplanted new seedlings to replace the trees cut at a cost of $121,000.
Part 1
Determine the depreciation expense and the cost of timber sold related to depletion for 2008. (Round intermediate calculations to 5 decimal places, e.g XXXXXXXXXXand final answers to 0 decimal places, e.g. 5,125.)
Depreciation expense
$
Cost of timber sold
$
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Vaughn has not logged since 2008. If Vaughn logged and sold 1,089,000 board feet of timber in 2019, when the timber cruise (appraiser) estimated 6,050,000 board feet, determine the cost of timber sold related to depletion for 2019. (Round intermediate calculations to 5 decimal places, e.g XXXXXXXXXXand final answers to 0 decimal places, e.g. 5,125.)
Cost of timber sold
$
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Questions # 4
The 2014 Annual Report of Tootsie Roll Industries contains the following information.
(in millions)
December 31, 2014
December 31, 2013
Total assets
$910.4
$888.4
Total liabilities
219.3
208.1
Net sales
539.9
539.6
Net income
63.2
60.8
Compute the following ratios for Tootsie Roll for 2014.
(a)
Asset turnover (Round answer to 4 decimal places, e.g XXXXXXXXXXtimes.)
enter the asset turnover rounded to 4 decimal places
times
(b)
Return on assets (Round answer to 2 decimal places, e.g. 4.87%.)
enter the return on assets in percentages rounded to 2 decimal places
%
(c)
Profit margin on sales (Round answer to 3 decimal places, e.g. 4.872%.)
enter the profit margin on sales in percentages rounded to 3 decimal places
%
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Questions # 5
On January 1, 2015, a machine was purchased for $99,900. The machine has an estimated salvage value of $6,660 and an estimated useful life of 5 years. The machine can operate for 111,000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2015, 22,200 hrs; 2016, 27,750 hrs; 2017, 16,650 hrs; 2018, 33,300 hrs; and 2019, 11,100 hrs.
Part 1
Compute the annual depreciation charges over the machine’s life assuming a December 31 year-end for each of the following depreciation methods. (Round answers to 0 decimal places, e.g. 45,892.)
(1)
Straight-line Method
$
(2)
Activity Method
Yea
2015
$
2016
$
2017
$
2018
$
2019
$
(3)
Sum-of-the-Years'-Digits Method
Yea
2015
$
2016
$
2017
$
2018
$
2019
$
(4)
Double-Declining-Balance Method
Yea
2015
$
2016
$
2017
$
2018
$
2019
$
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Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying each of the following methods. (Round answers to 0 decimal places, e.g. 45,892.)
Yea
Straight-line Method
Sum-of-the-years'-digits method
Double-declining-balance method
2015
$
$
$
2016
2017
2018
2019
2020
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