- •108. On July 1, 2006, Jekel & Hyde Inc. Purchased land and incurred other costs relative to the construction of a new warehouse. A summary of economic activities is listed below:
- •Required:
- •Indicate the accounts that would be affected by the above transactions and the resulting balance in each account. Apply the interest on the construction loan to the cost of the building only.
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •In its 2004 annual report to shareholders, Boston Beer Co. Disclosed the following footnote:
- •E. Property, Plant and Equipment
- •128. Use a t- account to show the balances and changes during 2004 in Boston Beer's: Property, Plant and Equipment account and its Accumulated depreciation—Property, Plant & equipment account.
- •Required:
- •130. Use a t- account to show the balances and changes during 2004 in Plank Breweries:
- •Note 4 Property, Plant and Equipment
- •100. A summary of Klugman Company's December 31, 2006, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group:
- •101. A summary of London Fashion's December 31, 2006, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group:
- •114. Is there any evidence in Winchester's disclosures above that are consistent with earnings management?
- •Required:
- •121. Is there any evidence in hp's disclosures above that are consistent with earnings management?
- •100. Required:
- •101. Required:
- •104. Required:
- •105. Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •127. In its 2004 annual report to shareholders, Martin Marietta Materials, Inc. Included the following in its financial statement footnotes:
- •Note e: property, plant and equipment, net
- •In another footnote, the company reported:
121. Is there any evidence in hp's disclosures above that are consistent with earnings management?
Answer: There appears to be a temporary shift down in HP's allowance during 2004. While this could be using a cookie jar reserve from past years, it could also reflect temporary changes in credit risk anticipated by HP (tighter credit or improving economy).
On January 1, 2006, Hobart Mfg. Co. purchased a drill press at a cost of $36,000. The drill press is expected to last 10 years and have a residual value of $6,000. During its ten-year life, the equipment is expected to produce 500,000 units of product. In 2006 and 2007, 25,000 and 84,000 units, respectively, were produced.
100. Required:
Compute depreciation expense for 2006 and 2007 and the book value of the drill press at December 31, 2006 and 2007, assuming the straight-line method is used.
Answer:
|
Cost |
$36,000 |
|
|
|
|
Residual value |
6,000 |
|
|
|
|
Depreciable base |
$30,000 |
|
|
|
|
Estimated life (years) |
÷ 10 |
|
|
|
|
Annual depreciation $ |
3,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Depr. |
Accum. |
Dec. 31 |
|
Year |
Cost |
Expense |
Depr |
Book Value |
|
2006 |
$36,000 |
$3,000 |
$3,000 |
$33,000 |
|
2007 |
36,000 |
3,000 |
6,000 |
30,000 |
Learning Objective: 2 Level of Learning: 3
101. Required:
Compute depreciation expense for 2006 and 2007 and the book value of the drill press at December 31, 2006 and 2007, assuming the double-declining-balance method is used.
Answer:
Straight-line rate = 1/10 years = 10%. DDB = 2 x 10% = 20%
|
Cost, January 1, 2006 |
$36,000 |
|
2006 depreciation expense (20%) |
7,200 |
|
Book value, December 31, 2006 |
28,800 |
|
2007 depreciation expense (20%) |
5,760 |
|
Book value, December 31, 2007 |
$23,040 |
|
|
|
Learning Objective: 2 Level of Learning: 3
102. Required:
Compute depreciation expense for 2006 and 2007 and the book value of the drill press at December 31, 2006 and 2007, assuming the sum-of-the-years'-digits method is used.
Answer:
Denominator = n(n + 1)/2 = (10 x 11)/2 = 55
Depreciable base = $36,000 - 6,000 = $30,000
2006 depreciation expense: 10/55 x $30,000 = $5,455
2007 depreciation expense: 9/55 x $30,000 = $4,909
|
|
|
Depr. |
Accum. |
Dec. 31 |
|
Year |
Cost |
Expense |
Depr |
Book Value |
|
2006 |
$36,000 |
$5,455 |
5,455 |
$30,545 |
|
2007 |
36,000 |
4,909 |
10,364 |
25,636 |
Learning Objective: 2 Level of Learning: 3
103. Required:
Compute depreciation expense for 2006 and 2007 and the book value of the drill press at December 31, 2003 and 2004, assuming the units-of-production method is used.
Answer:
|
Depreciable base = $36,000 - 6,000 = |
$30,000 |
|
Estimated production (units) |
÷500,000 |
|
Depreciation per unit |
$.06 |
2006 depreciation expense: $.06 x 25,000 = $1,500
2007 depreciation expense: $.06 x 84,000 = $5,040
|
|
|
Depr. |
Accum. |
Dec. 31 |
|
Year |
Cost |
Expense |
Depr |
Book Value |
|
2006 |
$36,000 |
$1,500 |
$1,500 |
$34,500 |
|
2007 |
36,000 |
5,040 |
6,540 |
29,460 |
Learning Objective: 2 Level of Learning: 3
Use the following to answer questions 104-107:
On January 1, 2006, Morrow Inc. purchased a spooler at a cost of $40,000. The equipment is expected to last eight years and have a residual value of $4,000. During its eight-year life, the equipment is expected to produce 250,000 units of product. In 2006 and 2007, 42,000 and 76,000 units respectively were produced.