.3-21 Deland Company purchased
equipment on March 1, 2010, for $130,000. The residual value is $40,000 and the
estimated life is 10 years or 60,000 hours. Compute depreciation expense for
the year ending December 31, 2011, if the company uses the
double-declining-balance method of depreciation.
A) $21,666
B) $20,800
C) $26,333
D) $24,666
7.3-22 Bay Back
Company acquired equipment on June 30, 2011, for $210,000. The residual value
is $35,000 and the estimated life is 5 years or 40,000 hours. Compute the
balance in Accumulated Depreciation as of December 31, 2013, if Bay Back
Company uses the double-declining-balance method of depreciation.
A) $68,040
B) $134,400
C) $141,960
D) $149,520
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7.3-23
Paulâ€
s Lodging Corporation purchased equipment on January 1, 2010 for $180,000.
The equipment had an estimated useful life of 10 years and an estimated salvage
value of $30,000. After using the equipment for 3 years, the company determined
that the equipment could be used for an additional 9 years and
have a salvage value of $9,000.Assuming Paulâ€s Lodging
Corporation uses straight-line depreciation, compute
depreciation expense for the year ending December 31, 2013.
A)
$11,250
B)
$13,500
C)
$15,000
D)
$14,000
7.3-24 Jackson Corporation
acquired equipment on January 1, 2010, for $320,000. The equipment had an
estimated useful life of 10 years and an estimated salvage value of $25,000. On
January 1, 2013, Jackson Corporation revised the total useful life of the
equipment to 8 years and the estimated salvage value to be $20,000. Compute
depreciation expense for the year ending December 31, 2013, if Jackson
Corporation uses straight-line depreciation.
A)
$26,477
B)
$39,300
C)
$42,300
D)
$46,300
46
7.3-25
Jackson Corporation acquired equipment on January 1, 2010, for $320,000. The
equipment had an estimated useful life of 10 years and an estimated salvage
value of $25,000. On January 1, 2013, Jackson Corporation revised the total
useful life of the equipment to 6 years and the estimated salvage value to be
$20,000. Using the straight-line method of depreciation, what is the book value
as of December 31, 2013?
A) $161,000
B) $159,000
C) $154,333
D) $146,000
7.3-26 The Fall River
Corporation bought a plant asset on January 1, 2010, at a cost of $ 45,000.
Estimated residual value is $5,000 and the estimated useful life is 8 years.
The company uses straight-line depreciation. On January 1, 2013, Fall Riverâ€s
management revises the total estimated life to be 10 years, with estimated
residual value of $2,000. The balance in Accumulated Depreciation on December
31, 2013, is:
A) $16,358.
B) $21,429.
C) $10,000.
D) $19,000.
47
7.3-27 A
plant asset is acquired by a business on January 1, 2010, for $30,000. The
assetâ€s estimated residual value is $8,000 and its estimated life is 5 years.
Management chooses to use straight -line depreciation. On January 1, 2012,
management revises the total useful life to 6 years and the residual value to
be zero. Compute the balance in Accumulated Depreciation on December 31, 2012.
A) $4,400
B) $5,300
C) $8,800
D) $14,100
7.3-28 Assume ABC Inc. purchased machinery for $150,000 and
depreciated it on a straight-line basis over 15 years. The estimated residual
value was $15,000. After using the machinery for 5 years, the company realized
it will remain useful for only 5 more years and also revised the residual to
$12,000. Starting with the 6th year, the company began depreciating the
machinery over the newly revised life and residual value. Journalize entries to
record depreciation expense for year 1 and year 6.
48
7.3-29
Martin Motors purchased a machine that will help diagnose problems with
engines. The machine cost $210,000 on January 10, 2011 and a residual value of
$10,000 was anticipated, with a useful life of 5 years.
In 2011,
Martin Motors has a gross profit of $400,000 and operating expenses of
$180,000.
A) Martin
Motors has a tax rate of 35%. Compute the deprecation for 2011 under both the
straight-line and double-declining balance method.
B) Which
depreciation method, straight-line or accelerated method, should Martin Motors
use for tax purposes? What is the net cash saved between the 2 methods?
49
7.3-30 Martin Motors
purchased a machine that will help diagnose problems with engines. The machine
cost $210,000 on January 10, 2010 and a residual value of $10,000 was
anticipated, with a useful life of 5 years. These statistics are available:
DDB
Gross Profit
400,000
Operating
expenses
180,000
Income before
depreciation and taxes
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