26) On February 1, 2011, Delta Distribution Company purchased a delivery truck that cost $30,000. The truck has an estimated useful life of 150,000 miles and an estimated salvage value of $3,000. The truck is driven 10,000; 34,000; and 28,000 miles for the years 2011, 2012, and 2013, respectively.
Required:
1. Calculate the depreciation expense
per mile
using the activity (units-of-production) method.
2. Use the activity method to complete the chart below:
Year
|
Miles
driven
|
Depreciation expense
for the year ended Dec. 31
|
Book value at Dec. 31
|
2011
|
10,000
|
$
|
$
|
2012
|
34,000
|
$
|
$
|
2013
|
28,000
|
$
|
$
|
3. Explain why long-term assets must be depreciated, rather than recorded as expenses in the period when the asset is purchased.
4. Explain why land is
NOT
depreciated when other assets, such as trucks, are depreciated.
27) On January 1, 2011, Gamma Company purchased equipment that cost $30,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $5,000.
Required:
1. Use the double-declining balance method to complete the chart below:
Year
|
Depreciation expense for the year
ended Dec. 31
|
Book value at Dec. 31
|
2011
|
$
|
$
|
2012
|
$
|
$
|
2013
|
$
|
$
|
2. Explain why long-term assets must be depreciated.
3. Explain why land is
NOT
depreciated when assets like equipment are.
28) Indicate which financial statement would report the items listed in the table below.
Use the following code:
IS = Income statement
SE = Statement of changes in shareholders’ equity
BS = Balance sheet
CF = Statement of cash flows
NONE = The item does not appear on any financial statement.
Depreciation expense
|
|
Cash paid to purchase equipment
|
|
Accumulated depreciation
|
|
Cash received from selling land
|
|
Equipment book value
|
|
Cash paid to purchase a building
|
|
Cash paid to purchase new computers
|
|
Cash received from selling 3-year machinery
|
|
An asset's estimated useful life
|
|
An asset's estimated residual value
|
|
Cash paid to purchase land
|
|
Amortization expense
|
|
29) Indicate which financial statement would report the items listed in the table below.
Use the following code:
IS = Income statement
SE = Statement of changes in shareholders’ equity
BS = Balance sheet
CF = Statement of cash flows
NONE = The item does not appear on any financial statement.
Accumulated depreciation
|
|
Cash paid to purchase machinery
|
|
Cash received from selling an old building
|
|
The current fair market value of land owned
|
|
Cash received from selling 10-year old machinery
|
|
Cash paid to purchase a building
|
|
The historical cost of equipment owned
|
|
Depreciation expense
|
|
The amount of revenue a specific asset generates
|
|
Cash paid to purchase office furniture
|
|
Cash paid to buy other businesses
|
|
|
|