ACCT550 Week 7 Homework Assignment Chapter 11: E11-4, E11-9, E11-11, E11-17

E11-4 (LO1,2) (Depreciation Computations—Five Methods) Jon Seceda Furnace Corp. purchased machinery for \$315,000 on May 1, 2017. It is estimated that it will have a useful life of 10 years, salvage value of \$15,000, production of 240,000 units, and working hours of 25,000. During 2018, Seceda Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units.

E11-9 (LO2) (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

1. Compute the rate of depreciation per year to be applied to the plant assets under the composite method.

E11-11 (LO1,2) (Depreciation—Change in Estimate) Machinery purchased for \$60,000 by Tom Brady Co. in 2013 was originally estimated to have a life of 8 years with a salvage value of \$4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2018, it is determined that the total estimated life should be 10 years with a salvage value of \$4,500 at the end of that time. Assume straight-line depreciation.

E11-17 (LO3) (Impairment) Assume the same information as E11-16, except that Suarez intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be \$20,000.

Instructions

1. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017.
2. Prepare the journal entry (if any) to record depreciation expense for 2018.
3. The asset was not sold by December 31, 2018. The fair value of the equipment on that date is \$5,300,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still \$20,000.

Course: ACCT550 Intermediate Accounting I
School: Keller School of Management

• 15/04/2018
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