Question 10

Grouper Company is in the process of preparing its financial statements for 2017. Assume that no entries for depreciation have been recorded in 2017. The following information related to depreciation of fixed assets is provided to you.

1.

Grouper purchased equipment on January 2, 2014, for $80,400. At that time, the equipment had an estimated useful life of 10 years with a $5,400 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2017, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3,000 salvage value.

2.

During 2017, Grouper changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $320,000. It had a useful life of 10 years and a salvage value of $32,000. The following computations present depreciation on both bases for 2015 and 2016.

2016

2015

Straight-line

$28,800

$28,800

Declining-balance

51,200

64,000

3.

Grouper purchased a machine on July 1, 2015, at a cost of $130,000. The machine has a salvage value of $20,000 and a useful life of 8 years. Grouper?s bookkeeper recorded straight-line depreciation in 2015 and 2016 but failed to consider the salvage value.

Prepare the journal entries to record depreciation expense for 2017 and correct any errors made to date related to the information provided. (Ignore taxes.)(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.

Account Titles and Explanation

Debit

Credit

1.

2.

3.

(To record current year depreciation.)

(To correct prior year depreciation.)

SHOW LIST OF ACCOUNTS

LINK TO TEXT

Show comparative net income for 2016 and 2017. Income before depreciation expense was $300,000in 2017, and was $320,000in 2016. (Ignore taxes.)

GROUPERCOMPANY

Comparative Income Statements

For the Years 2017 and 2016

2017

2016

Income before depreciation expense

$

$

Depreciation expense

Net income

$

$

Question 1 Cheyenne Corp. purchased machinery for $321,300 on May 1, 2017. It is estimated that it will have a useful life of 10 years, salvage value of $15,300, production of 244,800 units, and working hours of 25,000. During 2018, Cheyenne Corp. uses the machinery for 2,650 hours, and the machinery produces 26,010 units. From the information given, compute the depreciation charge for 2018 under each of the following methods. (Round intermediate calculations to 2 decimal places, e.g. 5.25 and final answers to 0 decimal places, e.g. 45,892.) $ (a) Straight-line $ (b) Units-of-output $ (c) Working hours $ (d) Sum-of-the-years'-digits $ (e) Declining-balance (use 20% as the annual rate) Question 8 Sheffield Cole Inc. acquired the following assets in January of 2015. Equipment, estimated service life, 5 years; salvage value, $15,500 Building, estimated service life, 30 years; no salvage value $546,500 $639,000 The equipment has been depreciated using the sum-of-the-years'-digits method for the first 3 years for financial reporting purposes. In 2018, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 30 years to 40 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method. (a) (b) Prepare the general journal entry to record depreciation expense for the equipment in 2018. Prepare the journal entry to record depreciation expense for the building in 2018. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No Account Titles and . Explanation (a) Debit Credit (b) Question 9 Martinez Co. purchased a equipment on January 1, 2015, for $610,500. At that time, it was estimated that the equipment would have a 10-year life and no salvage value. On December 31, 2018, the firm's accountant found that the entry for depreciation expense had been omitted in 2016. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation, starting with the year 2018. At present, the company uses the sum-ofthe-years'-digits method for depreciating equipment. Prepare the general journal entries that should be made at December 31, 2018, to record these events. (Ignore tax effects.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31, 2018 (To correct for the omission of depreciation expense in 2016.) Dec. 31, 2018 (To record depreciation expense for 2018.) Question 10 Grouper Company is in the process of preparing its financial statements for 2017. Assume that no entries for depreciation have been recorded in 2017. The following information related to depreciation of fixed assets is provided to you. 1 . 2 . Grouper purchased equipment on January 2, 2014, for $80,400. At that time, the equipment had an estimated useful life of 10 years with a $5,400 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2017, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3,000 salvage value. During 2017, Grouper changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $320,000. It had a useful life of 10 years and a salvage value of $32,000. The following computations present depreciation on both bases for 2015 and 2016. 2016 Straight-line Declining-balance 3 . $28,800 51,200 2015 $28,800 64,000 Grouper purchased a machine on July 1, 2015, at a cost of $130,000. The machine has a salvage value of $20,000 and a useful life of 8 years. Grouper's bookkeeper recorded straight-line depreciation in 2015 and 2016 but failed to consider the salvage value. Prepare the journal entries to record depreciation expense for 2017 and correct any errors made to date related to the information provided. (Ignore taxes.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No Account Titles and . Explanation 1. 2. 3. (To record current year depreciation.) Debit Credit (To correct prior year depreciation.) SHOW LIST OF ACCOUNTS LINK TO TEXT Show comparative net income for 2016 and 2017. Income before depreciation expense was $300,000 in 2017, and was $320,000 in 2016. (Ignore taxes.) GROUPER COMPANY Comparative Income Statements For the Years 2017 and 2016 2017 $ 2016 $ Income before depreciation expense Depreciation expense $ Net income $