Chapter 11: Q3Q (page 582)
Some believe that accounting depreciation measures the decline in the value of fixed assets. Do you agree? Explain.
Answer
I disagree with the statement.
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(Composite Depreciation) Presented below is information related to LeBron James Manufacturing Corporation.
Asset | Cost | Estimated Salvage | Estimated Life (in years) |
A | \(40,500 | \)5,500 | 10 |
B | 33,600 | 4,800 | 9 |
C | 36,000 | 3,600 | 9 |
D | 19,000 | 1,500 | 7 |
E | 23,500 | 2,500 | 6 |
Instructions
Everly Corporation acquires a coal mine at a cost of \(400,000. Intangible development costs total \)100,000. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is \(80,000), after which it can be sold for \)160,000. Everly estimates that 4,000 tons of coal can be extracted. If 700 tons are extracted the first year, prepare the journal entry to record depletion.
(Unit, Group, and Composite Depreciation) The certified public accountant is frequently called upon by management for advice regarding methods of computing depreciation. Of comparable importance, although it arises less frequently, is the question of whether the depreciation method should be based on consideration of the assets as units, as a group, or as having a composite life.
Instructions
(1) units and
(2) a group or as having a composite life.
Question: Identify and explain the three types of classifications for investments in debt securities.
(Depreciation Computations—Four Methods) Robert Parish Corporation purchased a new machine for its assembly process on August 1, 2017. The cost of this machine was \(117,900. The company estimated that the machine would have a salvage value of \)12,900 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 21,000 hours. Year-end is December 31.
Instructions
Compute the depreciation expense under the following methods. Each of the following should be considered unrelated.
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