Recording Entries Using Composite Depreciation Method

California Utilities owns a power plant that consists of the following assets, all acquired on January 1.

		Estimated	Estimated
Asset	Cost	Residual Value	Life (Years)
Building	$420,000	$14,000	30
Machinery	133,000	0	10
Other equipment	70,000	7,000	6

Required a. Compute the total straight-line depreciation for the first year on all items combined. b. Compute the composite depreciation rate (based on cost) and the composite life. c. Provide the entry to record composite depreciation for the first year. d. Assume that all of the Other equipment was sold three years later for $8,400 cash. Prepare the entry for the sale of that equipment. Note: Round answers to the nearest whole dollar. a.

	Straight-Line Depreciation Expense
	Building	Answer
	Machinery	Answer
	Other Equipment	Answer
	Total depreciation expense for Year 1

b.

		Numerator		Denominator
	Composite depreciation rate	Answer	/	Answer	=
	Composite life (in years)	Answer	/	Answer	=

c.

Composite depreciation rate	x	AnswerBook valueDepreciable costOriginal costResidual value	=	Year 1 Depreciation Exp.
	x	Answer	=	Answer

Date	Account Name	Dr.	Cr.
Dec. 31, Year 1	CashInventoryPropertyBuildingOther EquipmentAccumulated DepreciationCost of Oil ReserveRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldDepreciation ExpenseExploration ExpenseRepairs ExpenseGain on Reversal of Impairment LossLoss on ImpairmentLoss on DisposalN/A		Answer
	CashInventoryPropertyBuildingOther EquipmentAccumulated DepreciationCost of Oil ReserveRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldDepreciation ExpenseExploration ExpenseRepairs ExpenseGain on Reversal of Impairment LossLoss on ImpairmentLoss on DisposalN/A		Answer
	To record composite depreciation.

d.

Date	Account Name	Dr.	Cr.
Dec. 31, Year 3	CashInventoryPropertyBuildingOther EquipmentAccumulated DepreciationCost of Oil ReserveRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldDepreciation ExpenseExploration ExpenseRepairs ExpenseGain on Reversal of Impairment LossLoss on ImpairmentLoss on DisposalN/A		Answer
	CashInventoryPropertyBuildingOther EquipmentAccumulated DepreciationCost of Oil ReserveRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldDepreciation ExpenseExploration ExpenseRepairs ExpenseGain on Reversal of Impairment LossLoss on ImpairmentLoss on DisposalN/A		Answer
	CashInventoryPropertyBuildingOther EquipmentAccumulated DepreciationCost of Oil ReserveRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldDepreciation ExpenseExploration ExpenseRepairs ExpenseGain on Reversal of Impairment LossLoss on ImpairmentLoss on DisposalN/A		Answer
	To record sale of equipment.

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