Financial Accounting Problem Ch 9

Chapter 9 Plant Assets

Acquisition Costs, Depreciation and Revaluation of Plant Assets

Part A: Determining the cost of plant assets

E9-3: On March 1, 2014, Rollinger Company acquired real estate on which it planned to construct a small office building. The company paid $80,000 in cash. An old warehouse on the property was razed at a cost of $9,400; the salvaged materials were sold for $1,700. Additional expenditures before construction began included $1,100 attorney's fee for work concerning the land purchase, $5,000 real estate broker's fee, $7,800 architect's fee, and $12,700 to put in driveways and a parking lot.

(1) Determine the amount to be reported as the cost of the land.

(2) For each cost not used in part (a), indicate the account to be debited.

Part B: Complete depreciation schedules

Acquisition cost of the copy machine: $1,000

Est. useful life (years) : 6 years

Est. residual value : $ 400

Est. life in units : 500 units

Actual usage:

Year 1: 150 sheets.

Year 2: 100 sheets.

Year 3: 100 sheets.

Year 4: 50 sheets.

Year 5: 50 sheets.

Year 6: 50 sheets.

Straight line method:

Annual Depreciation Expense = (acquisition cost - residual value)useful life

| Original Cost | Depreciation Expense | Accumulated Depreciation | Net Book Value(NBV) |

Year 1 | 1,000 | | | |

Year 2 | | | | |

Year 3 | | | | |

Year 4 | | | | |

Year 5 | | | | |

Year 6 | | | | |

Unit of production:

Annual Depreciation Expense = Annual units of production * Depreciation rate per unit;

Depreciation rate per unit = (acquisition cost - residual value)Estimated total units of production (or usage)

| Original Cost | Depreciation Expense | Accumulated Depreciation | Net Book Value(NBV) |

Year 1 | 1,000 | | | |

Year 2 | | | | |

Year 3 | | | | |

Year 4 | | | | |

Year 5 | | | | |

Year 6 | | | | |

Double Declining Method (DDB):...