Group Work Solutions for Chapter 8
1. Cost $62,000
Useful Life 5 years
Residual Value $8,000
Life in Miles 140,000
Actual Miles Yr 1 25,200
Actual Miles Yr 2 35,000
Dep Expense Yr 2 Book Value Yr 2
Straight Line
$ 10,800 $ 40,400
(62,000-8,000)/5yrs = $10,800 pr yr 62,000-(10,800+10,800)=$40,400
Units of Prod $13,500 $38,780
Yr 1 (62,000-8000)*(25,200/140,000)= $9,720
Yr 2 (62,000-8000)*(35,000/140,000)=$13,500 62,000-(9,720+13,500)=$38,780
DDB $14,880 $22,320
Yr 1 (62,000-0)*(2/5 or 40%)=24,800
Yr 2 (62,000-24,800)*(2/5 or 40%)=$14,880 62,000-(24,800+14,880)=$22,320
Accumulated Depreciation Balance at last year of asset’s life - $62,000 - $8,000 = $54,000
2. Accumulated Depreciation at January 1, 2016 $86,000
Depreciation Expense through May 2016 $ 5,200
Accumulated Depreciation at Date of Sale $91,200
Cost of Machine $100,000
Accumulated Depreciation $91,200
Book Value at Date of Sale $ 8,800
a) Fair Market Value $7,600 b) Fair Market Value $11,000
Book Value at Date of Sale $8,800 Book Value at Date of Sale $8,800
Loss on Sale of Asset ($1,200) Gain on Sale of Asset $2,200
a) Journal Entry
Cash 7,600
Accumulated Depreciation 91,200
Loss on Sale of Asset 1,200
Machine (Asset) 100,000
b) Journal Entry
Cash 11,000
Accumulated Depreciation 91,200
Machine (Asset) 100,000
Gain on Sale of Asset 2,200
3. Cost $95,000
Residual Value $15,000
Estimated Life 10 years
Change in Estimates at Beginning of Year 4 (After 3 years)
Residual Value $12,000
Estimated Live 8 years
Straight-Line Depreciation
1st Book Value at Date of Change
Depreciation Expense each Year ($95,000-15,000)/10 = $8,000 per year
Accumulated Depreciation after 3 years $8,000*3 = $24,000
Cost $95,000
Accumulated Depreciation ($24,000)
Book Value at Date of Change $71,000
2nd New Residual Value
Given $12,000
3rd Years Remaining in Life of Asset
Changes made at the beginning of year 4, 3 years of life have been used up.
New estimated life in years 8
Less Years Used Up (3)
Years Remaining 5
4th Depreciation Expense for Current and Future Years (Straight Line Depreciation)
($71,000-$12,000)/5=$11,800 per year in current and future years.