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Answers To Exercise 10.13-2c 10.15-2c 10.17

This document provides income statements and supporting calculations for a company using double-declining balance depreciation over 5 years. It shows depreciation expense decreasing each year from $109,960 in Year 1 to $0 in Year 5. Net income increases from a loss of $23,160 in Year 1 to income of $86,800 in Year 5. The calculations show how the depreciation rate of 40% is applied to declining book values to calculate annual depreciation expense.

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19 views

Answers To Exercise 10.13-2c 10.15-2c 10.17

This document provides income statements and supporting calculations for a company using double-declining balance depreciation over 5 years. It shows depreciation expense decreasing each year from $109,960 in Year 1 to $0 in Year 5. Net income increases from a loss of $23,160 in Year 1 to income of $86,800 in Year 5. The calculations show how the depreciation rate of 40% is applied to declining book values to calculate annual depreciation expense.

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Exercise 10-13

Double-declining-balance depreciation
Income
before
Depreciation

Year 1 ................ $ 86,800


Year 2 .................
86,800
Year 3 .................
86,800
Year 4 .................
86,800
Year 5 .................
86,800
Totals ................. $434,000

Depreciation
Expense*

Net
Income

$109,960
65,976
39,586
18,378
0
$233,900

$ (23,160)
20,824
47,214
68,422
86,800
$200,100

Supporting calculations for depreciation expense


*Note: (100% / 5 years) x 2 = 40% depreciation rate
Annual
Accumulated
Beginning
Depreciation
Depreciation at
Book
(40% of
the End of the
Value
Book Value)
Year
Year 1................ $274,900
$109,960
$109,960
Year 2................ 164,940
65,976
175,936
Year 3................
98,964
39,586**
215,522
Year 4................
59,378
18,378***
233,900
Year 5................
41,000
0
233,900
Total ..................
$233,900

Ending Book Value


($274,900 Cost Less
Accumulated
Depreciation)
$164,940
98,964
59,378
41,000
41,000

** rounded
*** Must not use $23,751; instead take only enough depreciation in Year 4 to
reduce book value to the $41,000 salvage value.

Exercise 10-15
1.

Equipment ..................................................................... 29,500


Cash ........................................................................

29,500

To record betterment.

2.

Repairs Expense ...........................................................


Cash ........................................................................

7,375
7,375

To record ordinary repairs.

3.

Equipment ..................................................................... 22,450


Cash ........................................................................
To record extraordinary repairs.

22,450

Exercise 10-17
2013

July 1

Depreciation Expense .............................................


Accumulated Depreciation--Machinery ............

5,875
5,875

To record one-half year depreciation.*


*Annual depreciation = $94,000 / 8 years = $11,750
Depreciation for 6 months in 2013 = $11,750 x 6/12 = $5,875

1. Sold for $43,593 cash


July 1

Cash ..............................................................................43,593
Accumulated DepreciationMachinery ....................52,875
Gain on Sale of Machinery ......................................
Machinery ..................................................................

2,468
94,000

To record sale of machinery.*

*Total accumulated depreciation at date of disposal:


Four years 2009-2012 (4 x $11,750) ........ $47,000
Partial year 2013 (6/12 x $11,750) ............
5,875
Total accumulated depreciation ............. $52,875
Book value of machinery = $94,000 - $52,875 = $41,125
Gain on sale = $43,593 - $41,125 = $2,468

2. Destroyed by fire with $39,480 cash insurance settlement


July 1

Cash ..............................................................................39,480
Loss from Fire .............................................................. 1,645
Accumulated DepreciationMachinery ....................52,875
Machinery ..................................................................
To record disposal of machinery from fire.

Loss on sale = $39,480 - $41,125 = $(1,645)

94,000

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