Fall 2012 Assignment
E9-9A Computing depreciation and choosing a depreciation method
Beenthere Industries purchased new equipment on January 1, 2011 for $400,000. Beenthere estimates that the machine will have a useful life of five years and that the company will be able to sell it at the end of the fifth year for $50,000.
a. Compute the depreciation expense the Beenthere Industries would record for 2011, 2012, 2013, 2014, and 2015 under each of the following methods:
1. Straight-line depreciation
2. Double-declining-balance depreciation
b. If you were the president of Beenthere Industries, what might you consider when choosing a depreciation method for financial reporting purposes? Why?
E9-16A Reverse T-account analysis
The following financial information below has been taken from the records of Homework Company.
BALANCE SHEET 2011 2010
Equipment $120,000 $90,000
Less: Accumulated depreciation 23,600 10,000
Net book value 96,400 80,000
Depreciation expense $15,000 10,000
Loss on sale of equipment 3,600 0
Note: The company purchased equipment for $36,000 during 2011.
a. How much cash was collected on the sale of equipment during 2011?
b. Reconstruct the entry that recorded the sale of equipment during 2011.