Business Finance
Blackhawk Technical College Mastering Depreciation Homework Exercises

Blackhawk Technical College

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Can you help me understand this Accounting question?

I need help with a assignment for my bookkeeper review class. I have attached a word document, I just want the answers on the word document itself.

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MASTERING DEPRECIATION HOMEWORK EXERCISES Unless otherwise indicated in the problem, all companies use a calendar year. Section 1−DEPRECIATION ON THE FINANCIAL STATEMENTS V. TAX RETURN Section 2−DEPRECIATION UNDER GAAP (FOR BOOK PURPOSES) 1. A company that prepares financial statements under GAAP for a third party, such as a bank, normally engages a CPA unrelated to the company to go over them in one of three different ways. Name each way and briefly describe it. 2. What is the purpose of depreciation? 3. What is the adjusting entry to record $10,000 of depreciation expense? 4. If a company used tax depreciation for its books and were audited, what factor would require the company to recalculate depreciation under one of the GAAP methods? 5. What four factors are required to calculate an asset’s depreciation expense? 6. APEX Incorporated purchases a machine with a note payable. Expenditures include the machine ($100,000), freight ($2,500), sales tax ($4,500) and installation ($3,300). Record the journal entry to book the acquisition. 7. Select the term on the right that best matches the description on the left. Terms may be used once, more than once, or not at all. a. audit 1. An accelerated method of depreciation. b. book value 2. When a company can use tax depreciation on c. compilation audited financial statements. d. fair market value 3. A CPA organizes financial information e. historical cost provided by the company but does not express f. materiality an opinion as to whether the information g. residual value materially conforms to GAAP. h. salvage value 4. Depreciation method that yields the same i. straight-line amount of depreciation each year. j. sum-of-the-years’ digits 5. Undepreciated cost on the balance sheet. 8. A company purchases a building and land for $500,000. The appraisal attributes a fair market value (FMV) of 250,000 to the land and $350,000 to the building. a. What is the acquisition cost of the land? b. What is the acquisition cost of the building? 9. A firm purchases for $5,000 a computer and printer. The appraisal attributes a fair market value (FMV) of $4,000 to the computer and $2,000 to the printer. a. What is the acquisition cost of the computer? b. What is the acquisition cost of the printer? © American Institute of Professional Bookkeepers, 2019 Homework Exercises 1 Mastering Depreciation Section 3−THE STRAIGHT-LINE (SL) METHOD OF DEPRECIATION 1. On January 1, 20X1, Apogee Corp. purchases for $101,700 a machine with an estimated useful life of 3 years and a residual value of $4,500. Apogee uses straight-line depreciation. Complete the table below. Year 20X1 20X2 20X3 Year-beginning book value Depreciation expense Accumulated depreciation Year-end book value 2. On January 1, 20X1, Cayler Corp. purchases for $151,500 a machine with an estimated useful life of 3 years and a salvage value of $4,500. Cayler uses straight-line depreciation. Complete the table below. Year 20X1 20X2 20X3 Year-beginning book value Depreciation expense Accumulated depreciation Year-end book value 3. On June 1, 20X1, Apache Corp. purchases for $101,700 a machine with an estimated useful life of 3 years and a scrap value of $4,500. Apache uses straightline depreciation. Complete the table below. Year 20X1 20X2 20X3 20X4 Year-beginning book value Depreciation expense Accumulated depreciation Year-end book value 4. On October 1, 20X1, Dax Corp. purchases for $125,000 a machine with an estimated useful life of 4 years and a residual value of $5,000. a. Dax uses straight-line depreciation. Complete the table below. Year Year-beginning book value Depreciation expense Accumulated depreciation Year-end book value 20X1 20X2 20X3 20X4 20X5 b. Prepare the adjusting journal entry to record 20X3 depreciation expense. (continued) Homework Exercises 2 Mastering Depreciation 5. On March 1, 20X1, Efay Co. purchases for $600,000 a machine with an estimated useful life of 5 years and a salvage value of $15,000. a. Efay uses straight-line depreciation. Complete the table below. Year 20X1 20X2 20X3 20X4 20X5 20X6 Year-beginning book value Depreciation expense Accumulated depreciation Year-end book value b. Prepare the adjusting journal entry to record 20X1 depreciation expense. Homework Exercises 3 Mastering Depreciation Section 4−THE UNITS OF PRODUCTION (UOP) METHOD OF DEPRECIATION 1. On January 1, 20X1, Apogee Corp. purchases for $101,700 a machine with an estimated useful life at 12,000 machine hours and a scrap value of $4,500. In Year 1, Apogee uses the machine for 5,100 hours; in Year 2, 4,200 hours; and in Year 3, 4,400 hours. Apogee uses UOP depreciation. Complete the table below. Year-beginning Year book value 20X1 20X2 20X3 Depreciation expense Accumulated depreciation Year-end book value 2. On January 1, 20X1, Cayler Corp. purchases $151,500 a machine for which it estimates a useful life of 20,000 machine hours and a salvage value of $4,500. In Year 1, Cayler uses the machine for 9,100 hours; in Year 2, 6,200 hours; and in Year 3, 9,400 hours. Cayler uses UOP depreciation. Complete the table below. Year-beginning Year book value 20X1 20X2 20X3 Depreciation expense Accumulated depreciation Year-end book value 3. On June 1, 20X1, Apache Corp. purchases for $101,700 a machine for which it estimates a useful life of 12,000 machine hours and a residual value of $4,500. In Year 1, Apache uses the machine for 3,100 hours; in Year 2, 5,600 hours; and in Year 3, 4,000 hours. Apache uses UOP depreciation. Complete the table below. Year-beginning Year book value 20X1 20X2 20X3 Depreciation expense Accumulated depreciation Year-end book value 4. On October 1, 20X1, Dax Corp. purchases for $125,000 a machine that Dax estimates will have a useful life of 20,000 machine hours and a scrap value of $5,000. In Year 1, Dax uses the machine for 2,400 hours; in Year 2, 8,200 hours; in Year 3, 7,500 hours; and in Year 4, 6,600 hours. a. Dax uses UOP depreciation. Complete the table below. Year 20X1 20X2 20X3 20X4 Year-beginning book value Depreciation expense Accumulated depreciation Year-end book value b. Prepare the adjusting journal entry to record 20X3 depreciation expense. (continued) Homework Exercises 4 Mastering Depreciation 5. On March 1, 20X1, Efay Company purchases for $600,000 a machine that Efay estimates will have a useful life of 50,000 machine hours and a salvage value of for $15,000. In Year 1, Efay uses the machine for 11,100 hours; in Year 2, 8,600 hours; in Year 3, 9,100 hours; in Year 4, 12,000 hours; and in Year 5, 13,600. a. Efay uses UOP depreciation. Complete the table below. Year 20X1 20X2 20X3 20X4 20X5 Year-beginning book value Depreciation expense Accumulated depreciation Year-end book value b. Prepare the adjusting journal entry to record 20X1 depreciation expense. Homework Exercises 5 Mastering Depreciation Homework Exercises 6 ...
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Final Answer

See the solution attached below. Let me know if you need anything else

1

Question 1
1. Compilation: In compilation, the CPA prepares financial statements for the company
based on the management representation without verifying the information.
2. Review: In review, the CPA performs a limited inspection of the information presented in
the financial statements provided by the company to ascertain whether the information is
correct and whether material differences exist.
3. Audit: In audit, the CPA examines the financial statements to ascertain whether the
financial statements are presented in a true and fair view and to express an opinion on
whether the financial statements are presented in accordance to the generally accepted
accounting principles (GAAP)

Question 2
The purpose of depreciation is to charge and allocate the cost of an asset to every accounting
year that the asset is put into use. This is in line with the matching principle whereby expenses in
a particular period are matched with revenues earned during the same period.
Question 3
Account
Depreciation Expense
Accumulated Depreciation

Debit
$10,000

Credit
$10,000

Question 4
Depreciation would be recalculated if the difference between tax depreciation for its books of the
company and the tax depreciation for Generally Accepted Accounting Principles (GAAP) is
material.
Question 5
1.
2.
3.
4.

Cost of the asset
Useful life of the asset
Salvage/residual value of the asset
Method of depreciation used.

2

Question 6
Total cost of the asset = $100,000 + $2,500 + $4,500 + $3,300 = $110,300
Journal Entry:
Account
Machine
Notes Payable

Debit
$110,300

Credit
$110,300

Question 7
1.
2.
3.
4.
5.

J (Sum of the years’ digits)
...

FrankRose23 (2520)
New York University

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