#GRADE (1)

Principles of Accounting(2)

CH 10

SECTION 1

Exercise 10-3 (20 minutes)

Purchase price ...............................................
Closing costs .................................................
Total cost of acquisition ...............................

$368,250
19,600
$387,850

Allocation of total cost

Land ..........................
Land improvements ..
Building ....................
Totals ........................

Appraised
Value

Percent
of Total

Applying %
to Cost

Apportioned
Cost

$166,320
55,440
174,240
$396,000

42%
14
44
100%*

$387,850 x .42
$387,850 x .14
$387,850 x .44

$162,897
54,299
170,654
$387,850

* Appraisal percent of total numbers are rounded to the nearest whole percentage.

Journal entry
Land ....................................................................
Land Improvements ...........................................
Building ..............................................................
Cash .............................................................

162,897
54,299
170,654
387,850

To record costs of lump-sum purchase.

Exercise 10-4 (15 minutes)

Straight-line depreciation: ($147,000 - $30,000) / 4 years = $29,250 per
year

Year

Annual Depreciation Year-End Book Value

2011 .......

$ 29,250

$117,750

2012 .......

29,250

88,500

2013 .......

29,250

59,250

2014 .......

29,250

30,000

Total .......

$117,000

#GRADE (1)

Principles of Accounting(2)

CH 10

SECTION 1

Exercise 10-5 (20 minutes)

Double-declining-balance depreciation
Depreciation rate: 100% / 4 years = 25% x 2 = 50%
Beginning-Year Depreciation
Annual
Year
Book Value
Rate
Depreciation
2011 .......
$147,000
50%
$ 73,500
2012 .......
73,500
50
36,750
2013 .......
36,750
50
6,750*
2014 .......
30,000
--Total ......
$117,000

Year-End
Book Value
$73,500
36,750
30,000
30,000

* Do not depreciate more than $6,750 in the third year since the salvage
value is not subject to depreciation.

Exercise 10-6 (10 minutes)

Straight-line
($42,300 - $6,000) / 10 years = $3,630

Exercise 10-7 (10 minutes)

Units-of-production
Depreciation per unit = ($42,300 - $6,000) / 363,000 units = $0.10
per unit
For 35,000 units in second year: Depreciation = 35,000 x $0.10 =
$3,500

Exercise 10-8 (15 minutes)

Double-declining-balance
Double-declining-balance rate = (100% / 10 years) x 2 = 20% per
year
First years depreciation = $42,300 x 20% = $8,460

#GRADE (1)

Principles of Accounting(2)

CH 10

SECTION 1

Book value at beginning of second year = $42,300 - $8,460 =

$33,840
Second years depreciation = $33,840 x 20% = $6,768

#GRADE (1)

Principles of Accounting(2)

CH 10

SECTION 1

Problem 10-5A (25 minutes)

Cost of machine ...................................
Less estimated salvage value .............
Total depreciable cost .........................

Straight-Linea

Year

$210,000
20,000
$190,000

Double-DecliningBalancec

Units-of-Productionb

1 ..................

$ 47,500

$ 48,560

$105,000

2 ..................

47,500

48,960

52,500

3 ..................

47,500

47,840

26,250

4 ..................

47,500

44,640

6,250

$190,000

$190,000

$190,000

Totals ........
a

Straight- line:
Cost per year = $190,000/4 years = $47,500 per year

Units-of-production:
Cost per unit = $190,000/475,000 units = $0.40 per unit
Year
1 ............
2 ............
3 ............
4 ............
Total
..............
*

Units
121,400
122,400
119,600
118,200

Unit Cost
$0.40
0.40
0.40
0.40

Depreciation
$ 48,560
48,960
47,840
44,640*
$190,000

Take only enough depreciation in Year 4 to reduce book

value to the assets $20,000 salvage value.

Double-declining-balance:
(100%/4) x 2 = 50% depreciation rate

Year
1 ........
2 ........
3 ........
4 ........
Total ..

Beginning
Book
Value
$210,000
105,000
52,500
26,250

Annual
Depreciation
(50% of
Book Value)
$105,000
52,500
26,250
6,250*
$190,000

Accumulated
Depreciation
at the End of
the Year

Ending Book Value

($210,000 Cost Less
Accumulated
Depreciation)

$105,000
157,500
183,750
190,000

*Take only enough depreciation in Year 4 to reduce book value to

the assets $20,000 salvage value.

$105,000
52,500
26,250
20,000