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ACC557 Chapter 9 4 Qs

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E9-9 Presented below are selected transactions at Tomas Company for 2014.

Jan. 1 Retired a piece of machinery that was purchased on January 1, 2004. The machine
cost $58,000 on that date. It had a useful life of 10 years with no salvage value.

June 30 Sold a computer that was purchased on January 1, 2011. The computer cost
$40,000. It had a useful life of 5 years with no salvage value. The computer was
sold for $14,000.

Dec. 31 Discarded a delivery truck that was purchased on January 1, 2010. The truck
cost $33,000. It was depreciated based on a 6-year useful life with a $3,000
salvage value.

Instructions
Journalize all entries required on the above dates, including entries to update depreciation,
where applicable, on assets disposed of. Tomas Company uses straight-line depreciation.
(Assume depreciation is up to date as of December 31, 2013.)

E9-11 On July 1, 2014, Sutton Inc. invested $720,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2014, 120,000 tons of ore were mined and sold.

a) Calculate depletion cost per unit.

b) Prepare the journal entry to record depletion expense.

c) Assume that the 120,000 tons of ore were mined, but only 90,000 units were sold. How are the costs applicable to the 30,000 unsold units reported?

E9-12 The following are selected 2014 transactions of Yosuke Corporation.
Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is
indefinite.

May 1 Purchased for $84,000 a patent with an estimated useful life of 5 years and a
legal life of 20 years.

Instructions
Prepare necessary adjusting entries at December 31 to record amortization required by
the events above.

P9-3A On January 1, 2014, Thao Company purchased the following two machines for use in its production process.

Machine A:
The cash price of this machine was $35,000. Related expenditures included: sales tax $1,700, shipping costs $150, insurance during shipping $80, installation and testing costs $70, and $100 of oil and lubricants to be used with the machinery during its first year of operations. Thao estimates that the useful life of the machine is 5 years with a $5,000 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used.

Machine B:
The recorded cost of this machine was $80,000. Thao estimates that the useful life of the machine is 4 years with a $5,000 salvage value remaining at the end of that time period.

Instructions
(a) Prepare the following for Machine A.
(1) The journal entry to record its purchase on January 1, 2014.
(2) The journal entry to record annual depreciation at December 31, 2014.

(b) Calculate the amount of depreciation expense that Thao should record for Machine B
each year of its useful life under the following assumptions.
(1) Thao uses the straight-line method of depreciation.
(2) Thao uses the declining-balance method. The rate used is twice the straight-line rate.
(3) Thao uses the units-of-activity method and estimates that the useful life of the machine
is 125,000 units. Actual usage is as follows: 2014, 42,000 units; 2015, 35,000
units; 2016, 28,000 units; 2017, 20,000 units.

(c) Which method used to calculate depreciation on Machine B reports the highest amount
of depreciation expense in year 1 (2014)? The highest amount in year 4 (2017)? The

highest total amount over the 4-year period?

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