Straight-line Depreciation = ($900,000 historical cost $60,000 residual value) / 6 years useful life = $140,000

STRAIGHT-LINE DEPRECIATION SCHEDULE

YEAR	DEPRECIATION EXPENSE (INCOME STATEMENT)	COST (BALANCE SHEET)	ACCUMULATED DEPRECIATION (BALANCE SHEET)	NET BOOK VALUE (NBV) (BALANCE SHEET)
1 2014	$140,000	$900,000	$140,000	$760,000
2 2015	$140,000	$760,000	$280,000	$620,000
3 2016	$140,000	$620,000	$420,000	$480,000
4 2017	$140,000	$480,000	$560,000	$340,000
5 2018	$140,000	$340,000	$700,000	$200,000
6 2019	$140,000	$200,000	$840,000	$60,000
TOTAL

b. Units-of-output Method:

Rate of Depreciation per unit = ($900,000 - $60,000) / 6,000,000 tons = $.14 / Ton

Year	Tons of Coal	Rate per Unit	Depreciation Expense	Cost	Accumulated Depreciation	Net Book Value
1	700,000	x $.14	$98,000	$840,000	$98,000	$742,000
2	1,400,000	x $.14	$196,000	$742,000	$294,000	$448,000
3	1,600,000	x $.14	$224,000	$448,000
4	1,000,000	x $.14	$140,000	0	0	0
5	750,000	x $.14	$105,000	0	0	0
6	550,000	x $.14	$77,000	0	0	0

c. Double-declining balance depreciation:

Double-declining balance Rate = 2 x Straight-line Rate = 2 x 1 / 6 = 2 / 6 = 1 / 3

DDB Depreciation Schedule

Year	Beginning Net Book Value (a)	DDB % (b)	Depreciation Expense (c) = (a) x (b)	End-of-Year Accumulated Depreciation (d) = (c) + prior year (d)	End-of-Year Net Book Value (e) = Cost (d)
1	$900,000	33%	$297,000	$297,000	$603,000
2	$603,000	33%	$198,000	$495,000	$108,000
3	$108,000	33%	$35,640
4		33%
5		33%
6		33%

d.

Depreciation Method	Straight-Line	Units-of-output	Double-declining balance
Selling price
Net Book Value at the end of year 3
Gain / (Loss) on Sale

E11-19

a. Straight-line Depreciation = ($3,000,000 historical cost $350,000 residual value) / 10 years useful life = $265,000

STRAIGHT-LINE DEPRECIATION SCHEDULE

YEAR	DEPRECIATION EXPENSE (INCOME STATEMENT)	COST (BALANCE SHEET)	ACCUMULATED DEPRECIATION (BALANCE SHEET)	NET BOOK VALUE (NBV) (BALANCE SHEET)
1	$265,000	$3,000,000	$265,000	$2,735,000
2	$265,000	3,000,000	$530,000	$2,470,000
3	$265,000	3,000,000	$795,000	2,205,000
4	$265,000	3,000,000	$1,060,000	1,940,000
5	$265,000	3,000,000	$1,325,000	1,675,000
6	$265,000	3,000,000	$1,590,000	1,410,000
7	$265,000	3,000,000	1,855,000	1,145,000
8	$265,000	3,000,000	$2,120,000	$880,000
9	$265,000	3,000,000	$2,385,000	$615,000
10	$265,000	3,000,000	$2,650,000	$350,000
11	$265,000	3,000,000
TOTAL

a. Units-of-output Method: Assuming the output is the same as the numbers used in E11-17, the units-of-output results will not change.

b. Double-declining balance depreciation:

Double-declining balance rate = 2 x Straight-line rate = 2 x 1 / 10 = 2 / 10 = 1 / 5

YEAR	DEPRECIATION EXPENSE (INCOME STATEMENT)	COST (BALANCE SHEET)	ACCUMULATED DEPRECIATION (BALANCE SHEET)	NET BOOK VALUE (NBV) (BALANCE SHEET)
1
2
3
4
5
6
7
8
9
10
11

Method	Straight-line	Double-declining
Selling price
Book value
Gain / (Loss)

See E11-17 for units-of-output approach.

P11-5

First, calculate depreciation expense under the current and proposed policy to determine the effect on net income:

Annual depreciation expense under the current policy is $1,000:

P11-10

a. The journal entries to recognize the transactions under U.S. GAAP on the books of Hein Technologies are recorded as follows:

ACCOUNT	DEBIT	CREDIT
1. R&D Expense
Cash
2. R&D Expense
Patents
Cash
3. Leasehold
Cash
4. Leasehold Improvements
Cash
5. Franchise
Cash

b. Amortization expense under U.S. GAAP

ACCOUNT	DEBIT	CREDIT
Amortization ExpensePatent
Accumulated AmortizationPatent
Amortization ExpenseLeasehold
Leasehold
Amortization ExpenseLeasehold Improvements
Leasehold Improvements
Amortization ExpenseFranchise
Accumulated AmortizationFranchise

Intangible Asset	Type	Cost	Useful Life	Annual Amortization
Patent	Finite Life
Leasehold	Finite Life
Leasehold Improvements	Finite Life
Franchise	Finite Life
Goodwill	Indefinite Life
Trademark	Indefinite Life
Renewable License	Indefinite Life
Totals
Amortization Expense Year 1

c. Financial statement effects under U.S. GAAP:

Transaction	Income Statement	Balance Sheet	Cash Flow Statement
1
2
3
4
5
b.