Financial Accounting: An Integrated Statements Approach, 2nd Edition

Estimated Estimated Accumulated Miles

Truck Residual Useful Depreciation at Operated

No. Cost Value Life Beginning of Year During Year

1 $68,000 $8,000 300,000 miles $27,000 40,000 miles

2 48,600 6,600 200,000 39,900 12,000

3 38,000 3,000 200,000 8,050 36,000

4 28,000 4,000 120,000 — 21,000

a. Determine the depreciation rates per mile and the amount to be credited to the accumu-

lated depreciation section of each of the subsidiary accounts for the miles operated during

the current year.

b. Journalize the entry to record depreciation for the year.

A backhoe acquired on January 5 at a cost of $84,000 has an estimated useful life of 12 years.

Assuming that it will have no residual value, determine the depreciation for each of the first two

years (a) by the straight-line method and (b) by the declining-balance method, using twice the

straight-line rate. Round to the nearest dollar.

A dairy storage tank acquired at the beginning of the fiscal year at a cost of $98,500 has an esti-

mated residual value of $7,500 and an estimated useful life of 10 years. Determine the follow-

ing: (a) the amount of annual depreciation by the straight-line method and (b) the amount of

depreciation for the first and second years computed by the declining-balance method (at twice

the straight-line rate).

Sandblasting equipment acquired at a cost of $54,000 has an estimated residual value of $10,800

and an estimated useful life of 12 years. It was placed in service on April 1 of the current fiscal

year, which ends on December 31. Determine the depreciation for the current fiscal year and for

the following fiscal year by (a) the straight-line method and (b) the declining-balance method,

at twice the straight-line rate.

A warehouse with a cost of $800,000 has an estimated residual value of $200,000, an estimated

useful life of 40 years, and is depreciated by the straight-line method. (a) What is the amount

of the annual depreciation? (b) What is the book value at the end of the twentieth year of use?

(c) If at the start of the twenty-first year it is estimated that the remaining life is 25 years and

that the residual value is $150,000, what is the depreciation expense for each of the remaining

25 years?

The following data were taken from recent annual reports of Interstate Bakeries Corporation

(IBC). Interstate Bakeries produces, distributes, and sells fresh bakery products nationwide

through supermarkets, convenience stores, and its 67 bakeries and 1,500 thrift stores.

Current Year Preceding Year

Land and buildings $ 426,322,000 $ 418,928,000

Machinery and equipment 1,051,861,000 1,038,323,000

Accumulated depreciation 633,178,000 582,941,000

426 Chapter 9 Fixed Assets and Intangible Assets

Exercise 9-17

Partial-year depreciation

Goal 2

a. First year, $2,700

Exercise 9-18

Change in estimate

Goal 2

a. $15,000

Exercise 9-19

Book value of fixed assets

Goal 2

Exercise 9-15

Depreciation by two methods

Goal 2

a. $7,000

Exercise 9-16

Depreciation by two methods

Goal 2

a. $9,100

a. Truck #1, credit

Accumulated Depreciation,

$8,000