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Chapter 27

The document provides information on straight-line, hours of use, and production methods of calculating depreciation expense over multiple periods for various assets. It also includes examples of calculating composite depreciation rates and lives for a group of assets, as well as journal entries for retirement and replacement of assets using the composite method. The problems demonstrate how to calculate depreciation expense and accumulated depreciation under different methods both individually and on a composite basis.

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Crizel Dario
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1K views12 pages

Chapter 27

The document provides information on straight-line, hours of use, and production methods of calculating depreciation expense over multiple periods for various assets. It also includes examples of calculating composite depreciation rates and lives for a group of assets, as well as journal entries for retirement and replacement of assets using the composite method. The problems demonstrate how to calculate depreciation expense and accumulated depreciation under different methods both individually and on a composite basis.

Uploaded by

Crizel Dario
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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Problem 27-1

Cost 635,000.00
Residual Value 35,000.00
Depreciable amount 600,000.00

EUL 5 years
Service hours 60,000.00
Output 150,000.00

Requirement A: Straight-Line Method


Cost 635,000.00
Residual Value 35,000.00
Depreciable amount 600,000.00
EUL 5.00
Annual Deprecaition 120,000.00

Depreciation Expense
2020 120,000.00
2021 120,000.00
2022 120,000.00
2023 120,000.00
2024 120,000.00
600,000.00

Cost 635,000.00
Less: Accum. Depreciation (600,000.00)
Carrying amount 35,000.00 residual value; maibebenta mo after 5 years ng 35,000

Requirement B: Service Hours


Cost 635,000.00
Residual Value 35,000.00
Depreciable amount 600,000.00
Total service hours 60,000.00
Depreciation per hour 10.00

Depreciation Expense
2020 140,000.00
2021 130,000.00
2022 100,000.00
2023 110,000.00
2024 120,000.00
600,000.00

Cost 635,000.00
Less: Accum. Depreciation (600,000.00)
Carrying amount 35,000.00 residual value; maibebenta mo after 5 years ng 35,000

Requirement C: Production method


Cost 635,000.00
Residual Value 35,000.00
Depreciable amount 600,000.00
Total production in units 150,000.00
Depreciation per unit 4.00

Depreciation Expense
2020 136,000.00
2021 128,000.00
2022 100,000.00
2023 116,000.00
2024 120,000.00
600,000.00

Cost 635,000.00
Less: Accum. Depreciation (600,000.00)
Carrying amount 35,000.00 residual value; maibebenta mo after 5 years ng 35,000
mo after 5 years ng 35,000
mo after 5 years ng 35,000

mo after 5 years ng 35,000


Problem 27-2

Requirement A. Straight-Line Method 1-Jul-20


Cost 570,000.00
Residual value (20,000.00)
Depreciable amount 550,000.00
EUL 10 years
Annual Depreciation 55,000.00

Depreciation Expense
2020 27,500.00
2021 55,000.00

Requirement B. Working Hours


Cost 570,000.00
Residual value (20,000.00)
Depreciable amount 550,000.00
Service hours 50,000.00
Deprecaition per hour 11.00

Depreciation Expense
2020 33,000.00 since based on hours, no need to consider the purchase date
2021 55,000.00

Requirement C. Output Method


Cost 570,000.00
Residual value (20,000.00)
Depreciable amount 550,000.00
Production in units 200,000.00
Deprecaition per UNIT 2.75

Depreciation Expense
2020 49,500.00 since based on production, no need to consider the purchase date
2021 60,500.00
the purchase date

sider the purchase date


Problem 27-3
Depreciable
Cost Residual Value EUL
Amount
Machinery 310,000.00 10,000.00 300,000.00 5.00
Office Equipment 110,000.00 10,000.00 100,000.00 10.00
Building 1,600,000.00 100,000.00 1,500,000.00 15.00
Delivery Equipment 430,000.00 30,000.00 400,000.00 4.00
2,450,000.00 150,000.00 2,300,000.00

A. Composite Depreciation RATE 270,000.00


2,450,000.00
11.02%

B. Composite Life 2,300,000.00


270,000.00
8.51851851851852

C. Depreciation Expense 270,000.00


Accumulated Depreciation 270,000.00
Annual
Depreciation
60,000.00
10,000.00
100,000.00
100,000.00
270,000.00

270,000.00
Problem 27-4
Depreciable
Cost Residual Value EUL
Amount
Building 6,100,000.00 100,000.00 6,000,000.00 20.00
Machinery 2,550,000.00 50,000.00 2,500,000.00 5.00
Equipment 1,030,000.00 30,000.00 1,000,000.00 10.00
9,680,000.00 180,000.00 9,500,000.00

A. Composite Depreciation RATE 900,000.00


9,680,000.00
9.30%

B. Composite Life 9,500,000.00


900,000.00
10.5555555555556

C. Depreciation Expense 900,000.00


Accumulated Depreciation 900,000.00

D. Cash 40,000.00
Accumulated Depreciation 2,510,000.00 balancing figure; Cost - proce
Machinery 2,550,000.00 NO GAIN OR LOSS upon retire

E. Depreciation Expense 662,913.22


Accumulated Depreciation 662,913.22

Total PPE 9,680,000.00


Less: Machinery (2,550,000.00)
Adjusted cost 7,130,000.00
Composite rate 9.30%
Depreciation - 6th year 662,913.22

FS Presentation:
Building 6,100,000.00
Equipment 1,030,000.00
Total 7,130,000.00
Less: Accumulated Depreciation 2,652,913.22
Carrying amount 4,477,086.78
Annual
Depreciation
300,000.00
500,000.00
100,000.00
900,000.00

900,000.00

balancing figure; Cost - proceeds from sale upon retirement


NO GAIN OR LOSS upon retirement
Problem 27-5
Depreciable Annual
Cost Residual Value EUL
Amount Depreciation
Machine A 550,000.00 50,000.00 500,000.00 20.00 25,000.00
Machine B 200,000.00 20,000.00 180,000.00 15.00 12,000.00
Machine C 40,000.00 - 40,000.00 5.00 8,000.00
790,000.00 70,000.00 720,000.00 45,000.00

A. Composite Depreciation RATE 45,000.00


790,000.00
5.70%

B. Composite Life 720,000.00


45,000.00
16 B
Problem 27-6
Question 1

Total cost of equipment 5,000,000.00


Less: Accum. Depreciation (3,000,000.00)
Carrying amount - Dec 31, 2019 2,000,000.00
Equipment - New 2,500,000.00
Total cost 4,500,000.00
Composite rate 25%
Depreciation 1,125,000.00 C

Question 2
None. No gain or loss under composite method. D

Cash 350,000.00
Accumulated Depreciation 650,000.00
Equipment 1,000,000.00

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