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Chapter 10

Plant Assets, Natural Resources,and Intangibles

QUESTINS

1! A plant asset is tangible" it is used in the production or sale o# other assets or ser$ices" andit has a use#ul li#e longer than one accounting period!

%! The cost o# a plant asset includes all nor&al and reasonable e'penditures necessar( to getthe asset in place and read( #or its intended use!

)! *and is an asset +ith an unli&ited li#e and, there#ore, is not subect to depreciation! *andi&pro$e&ents ha$e li&ited li$es and are subect to depreciation!

-! #ten the lu&p.su& or bas/et purchase includes assets +ith di##erent li$es that &ust bedepreciated separatel(! So&eti&es the purchase &a( include land, +hich is ne$erdepreciated!

! The Accu&ulated epreciation23achiner( account is a contra asset account +ith a creditbalance that cannot be used to bu( an(thing! The balance o# the Accu&ulated epreciation23achiner( account re#lects that portion o# the &achiner(4s original cost that has beencharged to depreciation e'pense! It also gi$es so&e indication o# the asset5s age and ho+soon it +ill need to be replaced! An( #unds a$ailable #or bu(ing &achiner( are sho+n on the

balance sheet as li6uid assets +ith debit balances!7! The 3odi#ied Accelerated Cost Reco$er( S(ste& is not generall( acceptable #or #inancial

accounting purposes because it allocates depreciation o$er an arbitrar( period that isusuall( &uch shorter than the predicted use#ul li#e o# the asset!

8! The &aterialit( principle usti#ies charging lo+.cost plant asset purchases to e'pensebecause such a&ounts are unli/el( to i&pact the decisions o# #inancial state&ent users!

9! rdinar( repairs are &ade to /eep a plant asset in nor&al, good operating condition, andshould be charged to e'pense o# the current period! E'traordinar( repairs are &ade toe'tend the li#e o# a plant asset be(ond the original esti&ated li#e" the( are recorded as capitale'penditures :and added to the asset account;!

McGraw-Hill Companies, 2007

Solutions Manual, Chapter 10 45

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11! No, depletion e'pense should be calculated on the units that are e'tracted :si&ilar to theunits.o#.production basis; and sold!

1%! An intangible asset= :1; has no ph(sical e'istence" :%; deri$es $alue #ro& the uni6ue legaland contractual rights held b( its o+ner" and :); is used in the co&pan(5s operations!

1)! Intangible assets are generall( recorded at their cost and a&orti>ed o$er their predicteduse#ul li#e! :?o+e$er, so&e costs are not included, such as the research and de$elop&ent

costs leading up to a patent!; The costs o# intangible assets are generall( allocated toa&orti>ation e'pense using the straight.line &ethod o$er their use#ul li$es! I# the use#ul li#eo# an intangible asset is inde#inite, then it is not a&orti>ed2instead, it is annuall( tested #ori&pair&ent!

1-! A co&pan( has good+ill +hen its $alue e'ceeds the $alue o# its indi$idual assets andliabilities! @ood+ill appears in the balance sheet +hen one co&pan( ac6uires anotherco&pan( or separate seg&ent and pa(s a price that e'ceeds the co&bined $alues o# all itsnet assets :assets less liabilities; e'cluding good+ill!

1! No" this t(pe o# good+ill +ould not be a&orti>ed! Instead, the ASB :SFS 142; re6uires thatgood+ill be annuall( tested #or i&pair&ent! I# the boo/ $alue o# good+ill does note'ceed its#air :&ar/et; $alue, good+ill is not i&paired! ?o+e$er, i# the boo/ $alue o# good+ill e'ceedsits #air $alue, an i&pair&ent loss is recorded e6ual to that e'cess! :etails o# this t+o.step

test are in ad$anced courses!;17! Total asset turno$er is calculated b( di$iding net sales b( a$erage total assets! inancial

state&ent users can use total asset turno$er to e$aluate the e##icienc( o# a co&pan( in usingits assets to generate sales!

18! Best Bu( lists *and and buildings" *easehold i&pro$e&ents" i'tures and e6uip&ent"Propert( under &aster and capital lease! The boo/ $alue o# these assets is %,-7-,000,000!

19! Circuit Cit( calls its plant assets DPropert( and e6uip&ent, net! The boo/ $alue o# thepropert( and e6uip&ent is 8)9,90%,000

1


Fun!amental ccountin" #rinciples, 1$th %!ition4&

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QUICF STUIES

Quic/ Stud( 10.1 :10 &inutes;

Recorded cost G 1

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J % Kears o# li#e re&aining%),

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Quic/ Stud( 10. :10 &inutes;

Note= ouble.declining.balance rate G :100L 9 (ears; ' % G %L

irst (ear=9)0,000 ' %L G %08,00

Second (ear=:9)0,000 . %08,00; ' %L G 1,7%

Third (ear=:9)0,000 . %08,00 . 1,7%; ' %L G 117,81

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Boo/ $alue o# old &achine G 87,900 . -0,900 G )7,000

1! Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

-8,000

Accu&ulated depreciation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -0,900E6uip&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 87,900@ain on sale o# e6uip&entM!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 11,000

'o recor! the sale o( euipment)./Gain 47,000 - &,0003

%! Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

)7,000

Accu&ulated depreciation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -0,900E6uip&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 87,900

'o recor! the sale o( euipment)

)! Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

)1,000

Accu&ulated depreciation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -0,900*oss on sale o# e6uip&ent ,000

E6uip&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 87,900'o recor! the sale o( euipment)./oss 1,000 - &,0003


1! re 3ine!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1,900,000Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1,900,000

'o recor! cost o( ore mine)

%!epletion per unit G G 1!70 per ton

epletion E'pense2re 3ine!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %99,000Accu&ulated epletion2re 3ine!!!!!!!!!!!!!!!!!!!!!!!! %99,000 'o recor! !epletion o( ore mine :190,000 ' 1!70;)

Quic/ Stud( 10.< :10 &inutes;

Intangible Assets= b; Trade&ar/ c; *easehold #; Cop(right g; ranchise


Fun!amental ccountin" #rinciples, 1$th %!ition50

1,900,000 . %00,0001,000,000 tons

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Natural Resources= a; il +ell d; @old &ine h; Ti&berland

Note= Building is reported under plant assets!



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1!an! - *easehold I&pro$e&ents!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!10,000

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 10,000

'o recor! leasehol! improements)

%!ec! )1 A&orti>ation E'penseO*easehold I&pro$e&ents!!!!!!!!!!!!!1),1%

Accu&ulated A&orti>ation2*easehold I&pro$e&ents!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1),1%

'o recor! amorti6ation o( leasehol! oerthe remainin" li(e o( the lease).

M A&orti>ation G 10,000 9.(ear.lease.ter& G 1),1% per (ear!


Total asset turno$er G G 0!99 ti&es / millions3

Interpretation= The co&pan(5s turno$er o# 0!99 ti&es is &ar/edl( lo+er thanits co&petitors5 turno$er o# %!0! This co&pan( &ust per#or& better i# it is tobe success#ul in the long run!

Quic/ Stud( 10.1%A:10 &inutes;

Boo/ $alue o# old &achine G -%,-00 . 19,-00 G %-,000

1! 3achiner( :ne+;!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %,000Accu&ulated epreciationO3achiner( :old;!!!!!!!!!! 19,-00*oss on E'change o# AssetsM!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %,000

3achiner( :old;!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -%,-00Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! )0,000

'o recor! asset e*chan"e assumin" commercialsustance) .52,000 8 /24,000 9 0,0003 /2,0003

%! 3achiner( :ne+;M!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -7,000Accu&ulated epreciationO3achiner( :old;!!!!!!!!!! 19,-00

3achiner( :old;!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -%,-00Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %%,000

'o recor! asset e*chan"e assumin" lac: o(



1-,990:1,97< H 18,91

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commercial sustance).;oo: alue o( ol! asset 9 cash "ien 24,000 9 22,000



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E'ercise 10.) :%0 &inutes;

Purchase price!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! )8,%90Closing costs!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %0,100Total cost o# ac6uisition!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! )

KearBeginning.Kear

Boo/ alueepreciation

RateAnnual

epreciationKear.EndBoo/ alue

%008!!!!!!! 1-,000 0L 88,000 88,000%009!!!!!!! 88,000 0 )9,00 )9,00%00



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M o not depreciate &ore than 1),00 in the third (ear since thesal$age $alue is not subect to depreciation!


Fun!amental ccountin" #rinciples, 1$th %!ition5&

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E'ercise 10. :1 &inutes;

1! Straight.line :-),00 . ,000; 10 (ears G ),90

%! Units.o#.production epreciation per unit G :-),00 . ,000; )9,000 units G 0!10 per unitor )%,00 units in second (ear= epreciation G )%,00 ' 0!10 G ),%0

)! ouble.declining.balanceouble.declining.balance rate G :100L 10 (ears; ' % G %0L per (earirst (ear5s depreciation G -),00 ' %0L G 9,800Boo/ $alue at beginning o# second (ear G -),00 . 9,800 G )-,900Second (ear5s depreciation G )-,900 ' %0L G 7,

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*ess re$ised sal$age $alue!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! :%,000;Re&aining depreciable cost!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 11,1)0

Re$ised annual depreciation G 11,1)0 ) (ears G ),810


Fun!amental ccountin" #rinciples, 1$th %!ition5$

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E'ercise 10.9 :)0 &inutes;

1! Straight.line depreciationInco&ebe#ore

epreciationepreciation

E'penseMNet

Inco&e

Kear 1!!!!!!!!! 99,00 )9,

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E'ercise 10.< :% &inutes;

1! Annual depreciation G 8%,000 %0 (ears G %9,700 per (ear

Age o# the building G Accu&ulated depreciation Annual depreciation

G -%

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E'ercise 10.11 :%0 &inutes;

Note= Boo/ $alue o# &illing &achine G %0,000 . 19%,000 G 79,000

1! isposed at no $alue

an! ) *oss on Sale o# 3illing 3achine!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!79,000Accu&ulated epreciation23illing 3achine!!!!!!!!!!!!19%,000

3illing 3achine!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %0,000 'o recor! !isposal o( millin" machine)

%! Sold #or ),000 cash

an! ) Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!),000*oss on Sale o# 3illing 3achine!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!)),000Accu&ulated epreciation23illing 3achine!!!!!!!!!!!!19%,000

3illing 3achine!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %0,000 'o recor! cash sale o( millin" machine)

)! Sold #or 79,000 cash

an! % Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!79,000Accu&ulated epreciation23illing 3achine!!!!!!!!!!!!19%,000


-! Sold #or 90,000 cash

an! % Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!90,000Accu&ulated epreciation23illing 3achine!!!!!!!!!!!!19%,000 @ain on Sale o# 3illing 3achine!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1%,000



Solutions Manual, Chapter 10 &1

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E'ercise 10.1% :% &inutes;

%011ul( 1 epreciation E'pense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8,00

Accu&ulated epreciation..3achiner(!!!!!!!!!!!! 8,00 'o recor! one-hal( +ear !epreciation).

MAnnual depreciation G 10,000 8 (ears G 1,000epreciation #or 7 &onths in %011 G 1,000 ' 71% G 8,00

1! Sold #or -,00 cash

ul( 1 Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!-,00Accu&ulated epreciation23achiner(!!!!!!!!!!!!!!!!!!!!!78,00

@ain on Sale o# 3achiner(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9,000 3achiner(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 10,000

'o recor! sale o( machiner+).

MTotal accu&ulated depreciation at date o# disposal=our (ears %008.%010 :- ' 1,000;!!!!!!!!! 70,000Partial (ear %011 :71% ' 1,000;!!!!!!!!!!!!! 8,00Total accu&ulated depreciation!!!!!!!!!!!!!!! 78,00

Boo/ $alue o# &achiner( G 10,000 . 78,00 G )8,00

%! estro(ed b( #ire +ith %,000 cash insurance settle&ent

ul( 1 Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%,000*oss #ro& ire!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1%,00Accu&ulated epreciation23achiner(!!!!!!!!!!!!!!!!!!!!!78,00

3achiner(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 10,000'o recor! !isposal o( machiner+ (rom (ire)

E'ercise 10.1) :10 &inutes;

ec! )1 epletion E'pense23ineral eposit!!!!!!!!!!!!!!!!!!!!!!!!!-0,%9

Accu&ulated epletion23ineral eposit!!!!!!!!!!!! -0,%9'o recor! !epletion 1&&,200 tons * 2)44 405,52$?)

ec! )1 epreciation E'pense23achiner( !!!!!!!!!!!!!!!!!!!!!!!!!!!!%),%79 Accu&ulated epreciation23achiner(!!!!!!!!!!!!!!!! %),%79

'o recor! !epreciation 1&&,200 tons * 0)14 2,2&$?)


Fun!amental ccountin" #rinciples, 1$th %!ition&2

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E'ercise 10.1- :10 &inutes;

an! 1 Cop(right!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!-19,000 Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -19,000 'o recor! purchase o( cop+ri"ht)

ec! )1 A&orti>ation E'pense2Cop(right!!!!!!!!!!!!!!!!!!!!!!!!!!!!!-1,900 Accu&ulated A&orti>ation2Cop(right!!!!!!!!!!!!!!!!! -1,900 'o recor! amorti6ation o( cop+ri"ht

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E'ercise 10.19A:1 &inutes;

1! Boo/ $alue o# the old tractor :

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'o recor! asset e*chan"e) ./&0,200 - 15,0003



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PRB*E3 SET A

Proble& 10.1A :0 &inutes;

#art 1

Esti&ated3ar/et alue

Percento# Total

ApportionedCost

Building!!!!!!!!!!!!!!!!!!!!!!!!!! 09,900 )L -88,000*and!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %

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sa$ings #ro& use o# accelerated depreciation! The co&pan( gets to use theta' de#erred a&ounts #or in$est&ent purposes until the( are due!



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Proble& 10.%A :- &inutes;#art 1

*andBuilding

%Building

)

*andI&pro$e.&ents 1

*andI&pro$e&ents

%Purchase priceM!!!!!!!!!!!!!!!!!!!

1,71%,000

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'o recor! !epreciation

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Proble& 10.)A :0 &inutes;

%008an! 1 E6uip&ent !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!)00,700

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! )00,700 'o recor! loa!er costs/2$7,&00 911,500 91,5003)

an! ) E6uip&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!-,900 Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -,900 'o recor! etterment o( loa!er)

ec! )1 epreciation E'pense2E6uip&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!80,90M

Accu&ulated epreciation2E6uip&ent!!!!!!!!!!!!!! 80,90 'o recor! !epreciation)

M%008 depreciation a#ter anuar( )rdbetter&ent

Total original cost!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! )00,700 Plus cost o# better&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -,900 Re$ised cost o# e6uip&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! )0,-00 *ess re$ised sal$age :%0,700 H 1,-00;!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %%,000 Cost to be depreciated!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %9),-00

Annual depreciation :%9),-00 - (ears;!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 80,90

%009an! 1 E6uip&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!,-00

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ,-00

'o recor! e*traor!inar+ repair on loa!er)

eb! 18 Repairs E'pense2E6uip&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9%0 Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9%0 'o recor! or!inar+ repair on loa!er)

ec! )1 epreciation E'pense2E6uip&ent!!!!!!!!!!!!!!!!!!!!!!!!!!!-),

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Proble& 10.-A :-0 &inutes;

%008an! 1 Truc/s!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%%,000

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %%,000 'o recor! cost o( truc: /20,515 9 1,4$53)

ec! )1 epreciation E'pense2Truc/s!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -,000 Accu&ulated epreciation2Truc/s!!!!!!!!!!!!!!!!!!!!! -,000 'o recor! !epreciation

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Proble& 10.A :% &inutes;

Cost o# &achine!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%8,00*ess esti&ated sal$age $alue!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %0,000Total depreciable cost!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%)8,00

Kear Straight.*inea Units.o#.Productionbouble.eclining.

Balancec

1!!!!!!!!!!!!!!!!!!!!!!

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Proble& 10.7A :%0 &inutes;

1!an! % 3achiner(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!189,000

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 189,000 'o recor! machiner+ purchase)

an! ) 3achiner(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %,9-0 Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %,9-0 'o recor! machiner+ costs)

an! ) 3achiner(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1,170 Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1,170 'o recor! machiner+ costs)

%! a! irst (ear

ec! )1 epreciation E'pense23achiner(!!!!!!!!!!!!!!!!!!!!!!!!!!!!%9,000 Accu&ulated epreciation23achiner(!!!!!!!!!!!!!! %9,000 'o recor! !epreciation

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Accu&ulated epreciation23achiner(!!!!!!!!!!!!!!!!!!!!1-0,000*oss #ro& ire!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1%,000 3achiner(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 19%,000



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Proble& 10.8A :%0 &inutes;

a!ul( %) 3ineral eposit!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!-,81,000

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -,81,000 'o recor! purchase o( mineral !eposit)

b!ul( % 3achiner(!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!-10,000

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -10,000 'o recor! costs o( machiner+)

c!ec! )1 epletion E'pense23ineral eposit!!!!!!!!!!!!!!!!!!!!!!!!!--1,700

Accu&! epletion23ineral eposit!!!!!!!!!!!!!!!!!!!! --1,700 'o recor! !epletion ation applies tointangible assets +ith :de#inite; use#ul li$es" depletion applies to naturalresources" and depreciation applies to plant assets! Also, a&orti>ation ist(picall( co&puted using the straight.line &ethod, +hereas the units.o#.production &ethod is routinel( used in depletion!



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Proble& 10.9A :%0 &inutes;1! %009 :a;une % *easehold!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%00,000

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! %00,000

'o recor! pa+ment (or sulease)

:b;ul( 1 Prepaid Rent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!90,000

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 90,000 'o recor! prepai! annual lease rental)

:c;ul( *easehold I&pro$e&ents!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1)0,000

Cash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1)0,000 'o recor! costs o( leasehol! improements)

%! %009 :a;

ec! )1 Rent E'pense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!10,000 Accu&ulated A&orti>ation2*easehold!!!!!!!!!!!!!! 10,000 'o recor! leasehol! amorti6ation /200,000=10 *&=123)

:b;ec! )1 A&orti>ation E'pense2*easehold I&pro$e&ents!!!!!!!!!!!!7,00

Accu&ulated A&orti>ation2*easehold I&pro$e&ents!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 7,00 'o recor! leasehol! improement amorti6ation /10,000=10 +ears remainin" on lease * &=123)

:c;ec! )1 Rent E'pense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!-0,000

Prepaid Rent!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! -0,000 'o recor! one-hal( +ear lease rental /$0,000 * &=123)

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