西方财务会计课后习题答案.doc

.Chapter 7Plant Assets, Natural Resources, and IntangiblesCheck Points(5 min.) CP 7-11.Property, Plant and Equipment Millions2.Property, plant and equipment, at cost$26,915Less: Accumulated depreciation(13,007)Property, Plant and equipment, book value$13,908Book value is less than cost because accumulated depreciation is subtracted from cost to compute book value.(5 min) CP 7-2The related costs (real estate commission, back property tax, removal of a building, and survey fee) are included as part of the cost of the land because the buyer of the land must incur these costs to get the land ready for its intended use.After the land is ready for use, the related costs (listed above) would be expensed.(10 min.) CP 7-3Land ($150,000 .50).75,000Building ($150,000 .375).56,250Equipment ($150,000 .125)18,750Note Payable150,000EstimatedMarketValuePercent of TotalLand.$ 80,000$80,000 / $160,000= 50.0%Building. 60,000$60,000 / $160,000= 37.5Equipment. 20,000$20,000 / $160,000= 12.5Total.$160,000100.0%(10-15 min.) CP 7-4Income StatementRevenuesCORRECTExpensesUNDERSTATEDNet income OVERSTATEDBalance SheetCurrent assetsCORRECTTotal liabilitiesCORRECTPlant assetsOVERSTATEDOwners equityOVERSTATED Total liabilitiesTotal assetsOVERSTATEDand owners equityOVERSTATED(10 min.) CP 7-51.First-year depreciation:Straight-line ($20,000,000 $6,000,000) / 5 years.$2,800,000Units-of-production ($20,000,000 $6,000,000) /5,000,000 miles 750,000 miles.$2,100,000Double-declining-balance ($20,000,000 / 5 years 2).$8,000,0002.Book value:Straight-LineUnits-of-ProductionDouble-Declining-BalanceCost.$20,000,000$20,000,000$20,000,000Less AccumulatedDepreciation. (2,800,000) (2,100,000) (8,000,000)Book value.$17,200,000$17,900,000$12,000,000(10 min.) CP 7-6Third-year depreciation:a.Straight-line ($20,000,000 $6,000,000) / 5 years.$2,800,000b.Units-of-production ($20,000,000 $6,000,000) /5,000,000 miles 1,250,000 miles$3,500,000c.Double-declining-balance:Year 1($20,000,000 2/5) = $8,000,000Year 2($20,000,000 $8,000,000) 2/5 = $4,800,000Year 3($20,000,000 $8,000,000 $4,800,000 = $7,200,000; $7,200,000 $6,000,000 residual value)$1,200,000(10 min.) CP 7-71.The double-declining-balance (DDB) method offers the tax advantage for the first year of an assets use. The advantage results from the greater amount of DDB depreciation (versus the amount of depreciation under the other methods) during the first year. This saves cash that the taxpayer can invest to earn a return.2.DDB depreciation.$8,000,000Straight-line depreciation. (2,800,000)Excess depreciation tax deduction.$5,200,000Income tax rate .40Income tax savings for first year$2,080,000(5-10 min.) CP 7-8First-year depreciation (for a partial year):a.Straight-line (40,000,000 5,000,000) / 5 years 9/12 5,250,000b.Units-of-production (40,000,000 5,000,000)/ 5,000,000 miles 500,000 miles. 3,500,000c.Double-declining-balance (40,000,000 2/5 9/12).12,000,000UOP depreciation produces the highest net income (lowest depreciation). DDB depreciation produces the lowest net income (highest depreciation).(10 min.) CP 7-9Depreciation Expense Hot Dog Stand.15,000Accumulated Depreciation Hot Dog Stand.15,000Depreciation for years 1-4:$50,000 / 10 years=$ 5,000 per year$ 5,000 4 years=$20,000 for years 1-4Assets remainingdepreciable)(New) Estimated=(New) Annualbook valueuseful life remainingdepreciation$50,000 $20,000)2 years=$15,000 per year$30,000(10 min.) CP 7-10Req. 1(a)Straight-line depreciation method:20X5Jan. 1Cash10,000Acumulated Depreciation.16,000Loss on Sale of Delivery Truck.15,000Delivery Truck.41,000(b)Double-declining-balance depreciation method:20X5Jan. 1Cash10,000Acumulated Depreciation.26,240Loss on Sale of Delivery Truck.4,760Delivery Trucks.41,000Req. 2The difference between the amounts of the loss on disposal under the straight-line depreciation method and the double-declining-balance method results from the difference in depreciation amounts under the two depreciation methods.Depreciation is higher under DDB, so the assets book value is lower under DDB. As a result, there will be a smaller loss under DDB.(5-10 min.) CP 7-111.Units-of-production depreciation method is used to compute depletion expense.Billions2.Depletion Expense ($120 / 12) Accumulated Depletion6.03.At December 31, 20X5:BillionsCost of mineral assets.$120.0Less Accumulated depletion ($85.0 + $6.0). (91.0)Book value of mineral assets.$ 29.0Based on the book value ($29 billion) of oil and gas reserves, ExxonMobils minerals appear to be significantly depleted. To replenish oil and gas reserves, ExxonMobil must explore to locate new minerals.(5-10 min.) CP 7-12Req. 1Cost of goodwill purchased:Purchase price paid for Hot Chips, Inc.$8,500,000Market value of Hot Chips net assets:Market value of Hot Chips assets.$14,000,000Less: Hot Chips liabilities. (11,000,000)Market value of Hot Chips net assets 3,000,000Cost of goodwill.$5,500,000Req. 2PepsiCo will determine whether its goodwill has increased or decreased in value. If the goodwills value has increased, there is nothing to record. But if goodwills value has decreased, PepsiCo will record a loss and write down the book value of the goodwill.(10-15 min.) CP 7-13Req. 1Ling SoftwareIncome StatementYear Ended December 31, 20X4 Revenues:Sales revenue.$1,500,000Expenses:Cost of goods sold.$200,000Research and development expense.500,000Amortization of patent ($300,000 / 3).100,000Selling expenses 400,000Total expenses. 1,200,000Net income.$ 300,000Req. 2Lings outlook for future profits is favorable. The company earned a profit in its first year. Hopefully, future years profits will be even higher.(5 min.) CP 7-14Troy Satellite SystemsStatement of Cash FlowsYear Ended December 31, 20X5Cash flows from investing activities:MillionsPurchase of other companies$(160.0)Capital expenditures.(45.0)Proceeds from sale of cable operations. 123.0Net cash provided (used) by investing activities.$ (82.0)Exercises(5-10 min.) E 7-1Land:$200,000 + $150,000 + $2,000 + $2,500 + $5,500 = $360,000Land improvements:$93,000 + $10,400 + $6,000 = $109,400Building:$80,000 + $1,200,000 = $1,280,000(10-15 min.) E 7-2Allocation of cost to individual machines:MachineAppraisedValuePercentage of TotalMarket ValueTotalCostCost ofEach Asset1$ 27,000$27,000 / $108,000=.250$90,000 .25=$22,5002 45,000 45,000 / 108,000=.417 90,000 .417=37,5303 36,000 36,000 / 108,000= .333 90,000 .333= 29,970Totals$108,0001.000$90,000Sale price of machine no. 2.$45,000Cost. 37,530Gain on sale of machine$ 7,470(5-10 min.) E 7-3Capital expenditures:(a) Purchase price, (b) sales tax, (c) transportation and insurance, (d) installation, (e) training of personnel, (f) reinforcement to platform, (h) major overhaul, (j) lubrication before machine is placed in serviceImmediate expenses:(g) Income tax, (i) ordinary recurring repairs, (k) periodic lubrication(15 min.) E 7-4JournalACCOUNT TITLES AND EXPLANATIONDEBITCREDIT1.a.Land500,000Cash.500,000b.Building($1,000 + $20,000 + $830,000 + $39,000).890,000Note Payable830,000Cash ($1,000 + $20,000 + $39,000).60,000c.Depreciation Expense5,000Accumulated Depreciation($890,000 $190,000) / 35 3/125,0002.BALANCE SHEETPlant assets:Land.$500,000Building.$890,000Less Accumulated depreciation. (5,000)Building, net.885,0003.INCOME STATEMENTExpense:Depreciation expense.$ 5,000(10-15 min.) E 7-5Depreciation is the process of allocating a plant assets cost to expense over the period the asset is used. This process is designed to match depreciation expense against revenue over the assets life in order to measure income. Of less importance is the need to account for the assets decline in usefulness.Khuwaja is correct that depreciation can relate to the wear and tear of an asset. However, the depreciation of some assets is more affected by obsolescence than by physical wear and tear.Kasiak is wrong. Depreciation has nothing to do with a cash fund to replace an asset.(15-20 min.) E 7-6Year Straight-LineUnits-of-ProductionDouble-Declining-Balance20X4$ 3,000$ 4,080$ 7,50020X5 3,000 3,360 3,75020X6 3,000 2,160 75020X7 3,000 2,400 -0- $12,000$12,000$12,000_Computations:Straight-line: ($15,000 $3,000) ) 4 = $3,000 per year.Units-of-production: ($15,000 $3,000) ) 100,000 miles = $.12 per mile;20X434,000$.12=$4,08020X528,000 .12=3,36020X618,000 .12=2,16020X720,000 .12=2,400Double-declining-balance Twice the straight-line rate: 1/4 2 = 2/4 = 50%20X4$15,000 .50= $7,50020X5($15,000 $7,500) .50= 3,75020X6$7,500 $3,750 = $3,750 residual value of $3,000 = $750The units-of production method tracks the wear and tear on the van most closely.For income tax purposes, the double-declining-balance method is best because it provides the most depreciation and, thus, the largest tax deductions in the early life of the asset. The company can invest the tax savings to earn a return on the investment.(15 min.) E 7-7INCOME STATEMENTExpenses:Depreciation expense building($70,000 + $130,000 + $60,000) $50,000 / 20.$ 10,500Depreciation expense furniture and fixtures($40,000 2/5)16,000Supplies expense($9,000 $2,000)7,000BALANCE SHEETCurrent assets:Supplies.$ 2,000Plant assets:Building ($70,000 + $130,000 + $60,000).$260,000Less Accumulated depreciation (10,500)$249,500Furniture and fixtures.$ 40,000Less Accumulated depreciation (16,000)24,000STATEMENT OF CASH FLOWSCash flows from investing activities:Purchase of buildings ($70,000 + $60,000).$(130,000)Purchase of furniture and fixtures(40,000)(10-15 min.) E 7-8Let N = Number of hours of usageUnits-of-production=Cost Residual valueNumber ofdepreciationUseful life, in hourshours of use$3,680=$102,000 $10,000N50,000$3,680=$1.84NN=$3,680$1.84N=2,000 hoursAlternate solution setup:Depreciation=Cost Residual valueper hourUseful life, in hours=$102,000 $10,000=$1.8450,000UOP=DepreciationNumber ofDepreciationper hourhours of use$3,680=$1.84NN=$3,680$1.84N=2,000 hours(10-15 min.) E 7-9SHORT-CUT SOLUTION: SL DDBDepreciation by the two methods.$13,500*$30,000*Extra depreciation provided by DDB($30,000 $13,500).$16,500Multiply by the income tax rate .40Tax saved by using DDB = Extra cash to invest.$ 6,600Depreciation method for income tax: Double-declining-balanceCash saved by using MACRS depreciation:SLDDBCash revenues$100,000$100,000Cash expenses. 60,000 60,000Cash provided by operations before income tax.40,00040,000Depreciation expense (a noncash expense):*SL: ($210,000 $21,000) / 7 6/1213,500*DDB: ($210,000 2/7 6/12)._ 30,000Income before income tax.26,50010,000Income tax expense (40%).$ 10,600$ 4,000Cash-flow analysis: Cash provided by operations before income tax.$ 40,000$ 40,000Income tax expense. (10,600) (4,000)Cash provided by operations.$ 29,400$ 36,000Extra cash available for investment ifDDB is used ($36,000 $29,400).$ 6,600(10-15 min.) E 7-10JournalDATEACCOUNT TITLES AND EXPLANATIONDEBITCREDITYear20Depreciation Expense($900,000 $100,000) ) 40.20,000Accumulated Depreciation Building.20,000Year21Depreciation Expense45,000*Accumulated Depreciation Building.45,000_*Computation:Depreciable cost: $900,000 $100,000 = $800,000Depreciation through year 20: $800,000 ) 40 = $20,000 20 = $400,000Assets remaining depreciable book value:$900,000 $400,000 $50,000 = $450,000New estimated useful life remaining: 10 yearsNew annual depreciation: $450,000 ) 10 = $45,000(15-20 min.) E 7-11JournalDATEACCOUNT TITLES AND EXPLANATIONDEBITCREDIT20X5Depreciation for 9 months:Sept.30Depreciation Expense1,566aAccumulated Depreciation Fixtures.1,566Sale of fixtures:30Cash800Accumulated Depreciation Store Fixtures ($3,480 + $1,566).5,046Loss on Sale of Fixtures2,854bFixtures.8,700_a20X4 depreciation: $8,700 2/5 = $3,480 20X5 depreciation: ($8,700 $3,480) 2/5 9/12 = $1,566bLoss is computed as follows:Sale price of old fixtures.$ 800Book value of old fixtures:Cost.$8,700Less: Accumulated depreciation.(5,046) 3,654Loss on sale.$2,854(10-15 min.) E 7-12Cost of new truck=Book value of old truck+Cash paid$295,000= $175,000a+$120,000_aCost of old truck$285,000 Less Accumulated depreciation: ($285,000 $35,000) 75 + 120 + 210 + 35(110,000)b1,000_ Book value of old truck$175,000_bAlternate solution setup:($285,000 $35,000)=$.25 per mile1,000,000 miles75,000 + 120,000 + 210,000 + 35,000 = 440,000 miles drivenAccumulated depreciation=440,000 miles $.25=$110,000(10-15 min.) E 7-13JournalDATEACCOUNT TITLES AND EXPLANATIONDEBITCREDIT(a)Purchase of mineral rights:Mineral Asset.398,500 Cash398,500(b)Payment of fees and other costs:Mineral Asset ($500 + $1,000)1,500 Cash1,500Mineral Asset.60,000 Cash60,000(c)Depletion Expense115,000* Accumulated Depletion Mineral Asset115,000_*$398,500 + $500 + $1,000 + $60,000 = $460,000; $460,000 200,000 tons = $2.30 per ton; 50,000 tons $2.30 = $115,000Mineral asset book value = $345,000 ($460,000 $115,000).(10-15 min.) E 7-14JournalDATEACCOUNT TITLES AND EXPLANATIONDEBITCREDITPart1(a)Purchase of patent:Patents.400,000 Cash.400,000 (b)Amortization for each year:Amortization Expense Patents($400,000 5).80,000 Patents.80,000Part2Amortization for year 3:Amortization Expense Patents.120,000* Patents.120,000_*Asset remaining book value: $400,000 ($80,000 2) = $240,000 New estimated useful life remaining: 2 years = 5 3 New annual amortization: $240,000 2 = $120,000(5-10 min.) E 7-15Req. 1Cost of goodwill purchased:MillionsPurchase price paid for Randalls Food Stores$25Market value of Randalls net assets:Market value of Randalls assets ($10 + $70).$80Less: Randalls liabilities. (60)Market value of Randalls net assets 20Cost of goodwill$ 5Req. 2JournalDATEACCOUNT TITLES AND EXPLANATI