Accounting 25th Edition Solution
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CHAPTER 10
FIXED ASSETS AND INTANGIBLE ASSETS
10-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, DISCUSSION QUESTIONS
1. a. Property, plant, and equipment or Fixed assets
b. Current assets (merchandise inventory)
2. Real estate acquired as speculation should be listed in the balance sheet under the caption
“Investments,” below the Current Assets section.
3. $1,100,000
4. Capital expenditures include the cost of acquiring fixed assets and the cost of improving an
asset. These costs are recorded by increasing (debiting) a fixed asset account. Capital
expenditures also include the costs of extraordinary repairs, which are recorded by decreasing
(debiting) the asset’s accumulated depreciation account. Revenue expenditures are recorded as
expenses and are costs that benefit only the current period and are incurred for normal
maintenance and repairs of fixed assets.
5. Capital expenditure
6. 12 years
7. a. No
b. No
8. a. An accelerated depreciation method is most appropriate for situations in which the decline
in productivity or earning power of the asset is proportionately greater in the early years of
use than in later years, and the repairs tend to increase with the age of the asset.
b. An accelerated depreciation method reduces income tax payable to the IRS in the earlier
periods of an asset’s life. Thus, cash is freed up in the earlier periods to be used for other
business purposes.
c. MACRS was enacted by the Tax Reform Act of 1986. It is used for depreciation for
fixed assets acquired after 1986.
9. a. No, the accumulated depreciation for an asset cannot exceed the cost of the asset. To do so
would create a negative book value, which is meaningless.
b. The cost and accumulated depreciation should be removed from the accounts when the
asset is no longer useful and is removed from service. Presumably, the asset will then be
sold, traded in, or discarded.
10. a. Over the shorter of its legal life or years of usefulness.
b. Expense as incurred.
c. Goodwill should not be amortized, but written down when impaired.
10-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 10 Fixed Assets and Intangible Assets
PRACTICE EXERCISES
PE 10–1A
Aug. 7 Delivery Truck 1,675
Cash 1,675
7 Repairs and Maintenance Expense 40
Cash 40
PE 10–1B
Feb. 14 Accumulated Depreciation—Delivery Van 2,300
Cash 2,300
14 Delivery Van 450
Cash 450
PE 10–2A
a. $415,000 ($440,000 – $25,000)
b. 12.5% = (1/8)
c. $51,875 ($415,000 × 12.5%), or ($415,000 ÷ 8 years)
PE 10–2B
a. $1,150,000 ($1,450,000 – $300,000)
b. 10% = (1/10)
c. $115,000 ($1,150,000 × 10%), or ($1,150,000 ÷ 10 years)
PE 10–3A
a. $236,000 ($275,000 – $39,000)
b. $5.90 per hour ($236,000 ÷ 40,000 hours)
c. $15,694 (2,660 hours × $5.90)
PE 10–3B
a. $57,000 ($69,000 – $12,000)
b. $0.19 per mile ($57,000 ÷ 300,000 miles)
c. $14,630 (77,000 miles × $0.19)
10-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 10 Fixed Assets and Intangible Assets
PE 10–4A
a. 12.5% = [(1/16) × 2]
b. $35,000 ($280,000 × 12.5%)
PE 10–4B
a. 5% = [(1/40) × 2]
b. $68,750 ($1,375,000 × 5%)
PE 10–5A
a. $5,500 [($82,000 – $16,000) ÷ 12]
b. $43,500 [$82,000 – ($5,500 × 7)]
c. $5,250 [($43,500 – $12,000) ÷ 6]
PE 10–5B
a. $10,350 [($180,000 – $14,400) ÷ 16]
b. $76,500 [$180,000 – ($10,350 × 10)]
c. $8,250 [($76,500 – $10,500) ÷ 8]
PE 10–6A
a. $28,000 [($465,000 – $45,000) ÷ 15]
b. $6,000 loss {$235,000 – [$465,000 – ($28,000 × 8)]}
c. Cash 235,000
Accumulated Depreciation—Equipment 224,000
Loss on Sale of Equipment 6,000
Equipment 465,000
10-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
(Download complete and 100% accurate work written as per
requirements)
Topic: _________________
Student Name: __________
Course Title: ____________
Instructor: ______________
Date of submission: _______
For any problem feel free to message me on “Stuvia”
Complete Answer (Next Page)
CHAPTER 10
FIXED ASSETS AND INTANGIBLE ASSETS
10-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, DISCUSSION QUESTIONS
1. a. Property, plant, and equipment or Fixed assets
b. Current assets (merchandise inventory)
2. Real estate acquired as speculation should be listed in the balance sheet under the caption
“Investments,” below the Current Assets section.
3. $1,100,000
4. Capital expenditures include the cost of acquiring fixed assets and the cost of improving an
asset. These costs are recorded by increasing (debiting) a fixed asset account. Capital
expenditures also include the costs of extraordinary repairs, which are recorded by decreasing
(debiting) the asset’s accumulated depreciation account. Revenue expenditures are recorded as
expenses and are costs that benefit only the current period and are incurred for normal
maintenance and repairs of fixed assets.
5. Capital expenditure
6. 12 years
7. a. No
b. No
8. a. An accelerated depreciation method is most appropriate for situations in which the decline
in productivity or earning power of the asset is proportionately greater in the early years of
use than in later years, and the repairs tend to increase with the age of the asset.
b. An accelerated depreciation method reduces income tax payable to the IRS in the earlier
periods of an asset’s life. Thus, cash is freed up in the earlier periods to be used for other
business purposes.
c. MACRS was enacted by the Tax Reform Act of 1986. It is used for depreciation for
fixed assets acquired after 1986.
9. a. No, the accumulated depreciation for an asset cannot exceed the cost of the asset. To do so
would create a negative book value, which is meaningless.
b. The cost and accumulated depreciation should be removed from the accounts when the
asset is no longer useful and is removed from service. Presumably, the asset will then be
sold, traded in, or discarded.
10. a. Over the shorter of its legal life or years of usefulness.
b. Expense as incurred.
c. Goodwill should not be amortized, but written down when impaired.
10-2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 10 Fixed Assets and Intangible Assets
PRACTICE EXERCISES
PE 10–1A
Aug. 7 Delivery Truck 1,675
Cash 1,675
7 Repairs and Maintenance Expense 40
Cash 40
PE 10–1B
Feb. 14 Accumulated Depreciation—Delivery Van 2,300
Cash 2,300
14 Delivery Van 450
Cash 450
PE 10–2A
a. $415,000 ($440,000 – $25,000)
b. 12.5% = (1/8)
c. $51,875 ($415,000 × 12.5%), or ($415,000 ÷ 8 years)
PE 10–2B
a. $1,150,000 ($1,450,000 – $300,000)
b. 10% = (1/10)
c. $115,000 ($1,150,000 × 10%), or ($1,150,000 ÷ 10 years)
PE 10–3A
a. $236,000 ($275,000 – $39,000)
b. $5.90 per hour ($236,000 ÷ 40,000 hours)
c. $15,694 (2,660 hours × $5.90)
PE 10–3B
a. $57,000 ($69,000 – $12,000)
b. $0.19 per mile ($57,000 ÷ 300,000 miles)
c. $14,630 (77,000 miles × $0.19)
10-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, CHAPTER 10 Fixed Assets and Intangible Assets
PE 10–4A
a. 12.5% = [(1/16) × 2]
b. $35,000 ($280,000 × 12.5%)
PE 10–4B
a. 5% = [(1/40) × 2]
b. $68,750 ($1,375,000 × 5%)
PE 10–5A
a. $5,500 [($82,000 – $16,000) ÷ 12]
b. $43,500 [$82,000 – ($5,500 × 7)]
c. $5,250 [($43,500 – $12,000) ÷ 6]
PE 10–5B
a. $10,350 [($180,000 – $14,400) ÷ 16]
b. $76,500 [$180,000 – ($10,350 × 10)]
c. $8,250 [($76,500 – $10,500) ÷ 8]
PE 10–6A
a. $28,000 [($465,000 – $45,000) ÷ 15]
b. $6,000 loss {$235,000 – [$465,000 – ($28,000 × 8)]}
c. Cash 235,000
Accumulated Depreciation—Equipment 224,000
Loss on Sale of Equipment 6,000
Equipment 465,000
10-4
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
