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11.14. BRIEF EXERCISES

BE11-1 Fernandez Corporation purchased a truck at the beginning of 2010 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2010 and 31,000 miles in 2011. Compute depreciation expense for 2010 and 2011.

BE11-2 Lockard Company purchased machinery on January 1, 2010, for $80,000. The machinery is estimated to have a salvage value of $8,000 after a useful life of 8 years. (a) Compute 2010 depreciation expense using the straight-line method. (b) Compute 2010 depreciation expense using the straight-line method assuming the machinery was purchased on September 1, 2010.

BE11-3 Use the information for Lockard Company given in BE11-2. (a) Compute 2010 depreciation expense using the sum-of-the-years'-digits method. (b) Compute 2010 depreciation expense using the sum-of-the-years'-digits method assuming the machinery was purchased on April 1, 2010.

BE11-4 Use the information for Lockard Company given in BE11-2. (a) Compute 2010 depreciation expense using the double-declining-balance method. (b) Compute 2010 depreciation expense using the double-declining-balance method assuming the machinery was purchased on October 1, 2010.

BE11-5 Cominsky Company purchased a machine on July 1, 2011, for $28,000. Cominsky paid $200 in title fees and county property tax of $125 on the machine. In addition, Cominsky paid $500 shipping charges for delivery, and $475 was paid to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 6 years with a salvage value of $3,000. Determine the depreciation base of Cominsky's new machine. Cominsky uses straight-line depreciation.

BE11-6 Dickinson Inc. owns the following assets.

AssetCostSalvageEstimated Useful Life
A$70,000$ 7,00010 years
B50,0005,0005 years
C82,0004,00012 years


Compute the composite depreciation rate and the composite life of Dickinson's assets.

BE11-7 Holt Company purchased a computer for $8,000 on January 1, 2009. Straight-line depreciation is used, based on a 5-year life and a $1,000 salvage value. In 2011, the estimates are revised. Holt now feels the computer will be used until December 31, 2012, when it can be sold for $500. Compute the 2011 depreciation.

BE11-8 Jurassic Company owns machinery that cost $900,000 and has accumulated depreciation of $380,000. The expected future net cash flows from the use of the asset are expected to be $500,000. The fair value of the equipment is $400,000. Prepare the journal entry, if any, to record the impairment loss.

BE11-9 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.

BE11-10 In its 2007 annual report Campbell Soup Company reports beginning-of-the-year total assets of $7,745 million, end-of-the-year total assets of $6,445 million, total sales of $7,867 million, and net income of $854 million. (a) Compute Campbell's asset turnover ratio. (b) Compute Campbell's profit margin on sales. (c) Compute Campbell's rate of return on assets (1) using asset turnover and profit margin and (2) using net income.

*BE11-11 Francis Corporation purchased an asset at a cost of $50,000 on March 1, 2010. The asset has a useful life of 8 years and a salvage value of $4,000. For tax purposes, the MACRS class life is 5 years. Compute tax depreciation for each year 2010–2015.


  

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