Chapter 28

28-1
Depreciation table – straight line
Year Particular Depreciation Accum. Depr. Carrying Amount

Acquisition Cost 635,000
2021 120,000 120,000 515,000
2022 120,000 240,000 395,000
2023 120,000 360,000 275,000
2024 120,000 480,000 155,000
2025 120,000 600,000 35,000
600,000
Depreciation table – service hours method

2021 14,000 x 10 140,000 140,000 495,000
2022 13,000 x 10 130,000 270,000 365,000
2023 10,000 x 10 100,000 370,000 265,000
2024 11,000 x 10 110,000 480,000 155,000
2025 12,000 x 10 120,000 600,000 35,000
600,000
Depreciation rate per hour = 600,000 / 60,000 = 10
Depreciation table – production method

2021 34,000 x 4 136,000 136,000 499,000
2022 32,000 x 4 128,000 264,000 371,000
2023 25,000 x 4 100,000 364,000 271,000
2024 29,000 x 4 116,000 480,000 155,000
2025 30,000 x 4 120,000 600,000 35,000
600,000
Depreciation rate per unit of output = 600,000 / 150,000 = 4
28-2
a. Straight line method:
2021 27,500 (55,000 x 6/12) – July 01 – Dec 31 only
2022 55,000
b. Working hours method
Rate per hour = 550,000 / 50,000 hours = 11
2021 (3,000 hours x 11) 33,000
2022 (5,000 hours x 11) 55,000
c. Output method
Rate per unit = 550,000 / 200,000 units = 2.75
2021 (18,000 u x 2.75) 49,500
2022 (22,000 u x 2.75) 60,500
28-3
Asset Cost Salvage Depreciable Cost Life in years Annual Depr.
Machinery 310,000 10,000 300,000 5 60,000
Office Equipment 110,000 10,000 100,000 10 10,000
Building 1,600,000 100,000 1,500,000 15 100,000
Delivery Equipment 430,000 30,000 400,000 4 100,000
2,450,000 2,300,000 270,000
a. composite rate = 270,000 / 2,450,000 = 11.02%

b. composite life = 2,300,000 / 270,000 = 8.52 years
c. Depreciation 270,000
Accumulated Depreciation 270,000
28-4
Building 6,100,000 100,000 6,000,000 20 300,000
Machinery 2,550,000 50,000 2,500,000 5 500,000
Equipment 1,030,000 30,000 1,000,000 10 100,000
9,680,000 9,500,000 900,000
a. composite depreciation rate = 900,000 / 9,680,000 = 9.30%

b. average life = 9,500,000 / 900,000 = 10.56 years
c. Depreciation 900,000
Accumulated Depreciation 900,000
d. Cash 40,000
Accumulated Depreciation 2,510,000
Machinery 2,550,000
e. Depreciation 663,090
Accumulated Depreciation ((9,680,000-2,550,000) x 9.3%) 663,090
28-5 B
A 550,000 50,000 500,000 20 25,000
B 200,000 20,000 180,000 15 12,000
C 40,000 - 40,000 5 8,000
790,000 720,000 45,000
Composite life = 720,000 / 45,000 = 16 years
28-6
Question 1 A
Total cost, 01/01/21 5,000,000
Cost of new asset acquired 2,500,000
Cost of asset sold (1,000,000)
Remaining cost, 12/31/21 6,500,000
Depreciation for 2021 (25% x 6,500,000) 1,625,000
Question 2 D
Under the composite method, no gain or loss is recognized on the derecognition of an asset.
28-7 A
Cost of machinery 1,100,000
Residual value (50,00)
Depreciable amount 1,050,000
Straight line depreciation (1,050,000 / 10) 105,000
28-8 A
Depreciation (6,500,000 – 700,000 / 10) 580,000
28-9 A
Accumulated depreciation – 2021 5,000,000
Accumulated depreciation – 2020 3,875,000
Annual depreciation 1,125,000
Cost of building 25,000,000

Residual value (10% x 25,000,000) (2,500,000)
Useful life (22,500,000 / 1,125,000) 20 years
28-10 C
Depreciation of machinery (1,000,000 – 200,000 / 10) 80,000
Depreciation of drum (200,000 / 5) 40,000
Total depreciation for the current year 120,000
28-11 C
Depreciation – drilling machinery (6,400,000 / 10 x (9/12)) 480,000
Depreciation – drill house component (2,000,000 / 5 x (9/12)) 300,000
Depreciation, 2021 780,000
28-12 A
Rate per unit (8,100,000 - 600,000 / 25,000 units) 300
Depreciation for 2022 (7,000 x 300) 2,100,000
28-13 A
Invoice price 4,500,000
Cash discount (2% x 4,500,000) (90,000)
Delivery cost 80,000
Installation and testing 310,000
Total cost 4,800,000
Rate per unit (4,000,000 / 200,000) 20
Depreciation for 2021 (30,000 x 20) 600,000

Depreciation for 2022 (48,000 x 20) 960,000
Accumulated depreciation, 12/31/22 1,560,000
28-14 D
Cost, 07/01/21 5,200,000
Accum. Depr. – 12/31/22 (17,000 hours x 52) (884,000)
Carrying amount – 12/31/22 4,316,000
Rate per hour (5,200,000 / 100,000) 52
28-15 D
Purchase price 5,000,000
Shipping cost 50,000
Installation cost 120,000
Total cost 5,170,000
Useful life 10 years

Expired 1
Remaining useful life – 01/01/22 9 years
Original annual depreciation (4,870,000 / 10 years) 487,000

Depreciation of additions (360,000 / 9 years) 40,000
Total depreciation – 2022 527,000
28-16 B
Sale price 2,300,000
Carrying amount
Cost 4,200,000
Accumulated depreciation (3,600,000 / 5 x 3) 2,160,000 2,040,000
Gain 260,000
28-17 B
Accumulated depreciation – 12/31/21 3,700,000
Add: Depreciation for 2022 550,000
Total 4,250,000
Less: Accumulated Depreciation on PPE retirements (SQUEEZE) 250,000
Accumulated depreciation – 12/31/22 4,00,000
28-18 28-19
1. C 1. B
2. D 2. B
3. C 3. B
4. D 4. A
5. A 5. C
Accumulated depreciation
Beginning balance
Disposal / Annual Depreciation

derecognition of
asset
Ending balance

Chapter 28

Uploaded by

Copyright:

Available Formats

Chapter 28

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 28

Uploaded by

Copyright:

Available Formats

28-1

Depreciation table – straight line

Year Particular Depreciation Accum. Depr. Carrying Amount

Depreciation table – service hours method

Year Particular Depreciation Accum. Depr. Carrying Amount

Depreciation table – production method

a. composite rate = 270,000 / 2,450,000 = 11.02%

a. composite depreciation rate = 900,000 / 9,680,000 = 9.30%

Cost of building 25,000,000

Rate per unit (4,000,000 / 200,000) 20

Depreciation for 2021 (30,000 x 20) 600,000

Rate per hour (5,200,000 / 100,000) 52

Useful life 10 years

Original annual depreciation (4,870,000 / 10 years) 487,000

Disposal / Annual Depreciation

You might also like