Instructions for the Microsoft Excel Templates by Rex A Schildhouse

Extensive detail and information is contained within the help function of Microsoft Excel and in the provided text.

And information or data which may be required by the solution will be entered in cells with borders to help identify them.

Be advised, the template workbooks and worksheets are not protected.Overtyping any data may remove it.

You should enter your name, date, instructor's name, and course into the cells at the top of the page. This information will be printed on the top of each page if the template requires more than one page.

Each template is set to print with File Name, Page # of # Page(s), the print date, and the print time to assist in assembly of multiple pages.

If more than one page is required by the template, manual page breaks have been set to provide consistent presentation.

All of the cells have been correctly formatted for presentation and should not require any adjustment. For example, if the text requires one, two, or three significant digits in a presentation, the template has been set for that presentation in the appropriate cells.

In general, the yellow highlighted cells are the cells which work and effort should be presented. These entries may include date(s), account title(s), values, memorandum appropriate to the entry, or text answers to questions.

Where a yellow highlighted cell shows "Date" enter the appropriate date for that step of the challenge. This may be any date format that Microsoft Excel accepts. Some of these formats include "1/1/12", "01/01/12", and "01/01/2012." All of these will return January 01, 2012, in the format set in the template.

Where a yellow highlighted cell shows "Acct Nbr" enter the appropriate account number, provided in the template and in the text for that step of the challenge. This is entry may be a "Look to" formula to another cell where that information has been provided or previously entered.

Where a yellow highlighted cell shows "Account Title" enter the appropriate account title for that step of the challenge. This is a text entry and most of those cells are set for the proper indentation for that step. Frequently the chart of accounts appropriate to the challenge is provided and you can use the "look to" formula to reference the appropriate account title without typing it.

Check with your instructor to see if abbreviated account titles are acceptable. For example "A/R" for Accounts Receivable, "A/P" for Accounts Payable. If your instructor is using a comparison process between workbooks for grading, these abbreviates may not be acceptable.

Where a yellow highlighted cell shows titles such as "Values," "Amounts," or "Quantities" enter the appropriate numerical value for that step of the challenge. The cell is formatted for proper presentation of the entered information. If a dollar sign is appropriate, it should not be entered, Microsoft Excel will place it there through formatting. Commas and significant digits (decimals) are also set through formatting for common presentation. Since the formatting of the templates is not protected by any password, you may change any of the formatting found in the templates to meet your desires.

Where a yellow highlighted cell shows titles such as "Formula" you may enter the appropriate formula or enter a numerical value appropriate for that step of the challenge. Most of the values necessary for the appropriate formula are located on the template in cells with borders or in other yellow highlighted cells. The formula may be a simple "Look to" formula, an equal sign and a cell reference, "=E27" or more complex as "=E27*5," or something similar to the time-value-of-money formula. These are addressed in the tutorial text provided for Microsoft Excel.

Where a yellow highlighted cell shows "Text" enter the appropriate text for that step of the challenge. This may be a memorandum entry for a journal entry or a lengthy text answer discussing the results of an analysis of a company's financials. These titles can simply be typed over.

Where a yellow highlighted cell shows titles such as "Journal Number" or "Journ #" you should enter the appropriate number provided in the template and in the text for that step of the challenge. In general this will appear in instances such as "Record the following events in General Journal number six."

The print area is defined to fit onto 8 1/2" × 11" sheets in portrait or landscape mode as required. Margins are generally set to no less than 1/2" so most printers can print them without a problem. If you printer cannot accept margins less than 1" you may have to reformat the margins through Page Setup.

The display may have "Freeze Pane" invoked so column titles remain visible during data entry. This can be removed by utilizing the View menu and selecting "Unfreeze Panes" under "Freeze Panes."

When negative values are required, enter them by starting with a minus sign, "-". Negative values may be shown as ($400) or -$400. Negative values in formulas can be created by putting a minus sign in front of the cell reference - "=E10*-E11" will return a negative value if both cells E10 and E11 contain positive values.

Microsoft Office and Microsoft Excel are products of, and copyrighted by,Microsoft Corporation, One Microsoft Way, Redmond, Washington 98052-6399

document.xlsx, Exercise 11-1 Solution, Page 3 of 20, 04/17/2023, 22:19:05

Name: Solution Date:

Instructor: Course:

January 1, Year 1, at a cost of $518,000 . The asset is expected to have a service life of 12 years and a salvage value of $50,000

Instructions:

Straight-line method depreciation for each of Years 1 through 3 is computed as:

Cost: $518,000 Salvage value: 50,000

Depreciable value: 468,000 Asset life: (Years) 12

Annual straight-line depreciation value: $39,000

Excel formula = SLN(Cost,Salvage,Life) = SLN(E17,E18,E20) = $39,000Area for Excel calculations as desired.

Cost: $518,000 Salvage value: 50,000

Depreciable value: 468,000

DenominatorDepreciation expense for year: 1 12 78 $72,000 Depreciation expense for year: 2 11 78 $66,000 Depreciation expense for year: 3 10 78 $60,000

Excel formula = SYD(Cost,Salvage,Life,Period) = SYD(E38,E39,E43,D43) = $72,000 for year 1

Depreciation expense for year: 1 $72,000.00 Depreciation expense for year: 2 $66,000.00

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

E11-1 (Depreciation Computations—SL, SYD, DDB) Lansbury Company purchases equipment on

(a) Compute the amount of depreciation for each Years 1 through 3 using the straight-line depreciation method.

(b) Compute the amount of depreciation for each Years 1 through 3 using the sum-of-years digits depreciation method.

The sum of 1 through 12 = 1+2+3+4+5+6+7+8+9+10+11+12 = 1+12 + 2+11 + 3+10 + 4+9 + 5+8 + 6+7 = (1+12) + (2+11) + (3+10) + (4+9) + (5+8) + (6+7) = (13) + (13) + (13) + (13) + (13) + (13) = 13 X (12/2) = 13 X 6 = 78 the sum of the first year and the last year multiplied by one half of the total number of years.

Hint: Since "Sum-of-Years-Digits" title contains an "S", use salvage value to compute periodic depreciation expense.

Numerator /Year

PeriodDepreciation

document.xlsx, Exercise 11-1 Solution, Page 4 of 20, 04/17/2023, 22:19:05

Name: Solution Date:

Instructor: Course:Depreciation expense for year: 3 $60,000.00

Cost: $518,000 Salvage value: 50,000

Asset life: (Years) 12 Annual Straight-line Depreciation rate: 8.33%

Double-Declining factor: 200%Double-Declining annual rate: 16.67%

Year:1 $518,000 16.67% $86,333 $431,667 2 431,667 16.67% 71,944 359,722 3 359,722 16.67% 59,954 299,769

Excel formula = DDB(Cost,Salvage,Life,Period,Factor) = DDB(E63,E64,E65,C71) = $86,333 for year 11 $86,333 2 $71,944 3 $59,954

Note: Minor differences may occur due to rounding and significant digits.

(c) Compute the amount of depreciation for each Years 1 through 3 using the double-declining balance method. (In performing your calculations, round constant percentage to the nearest one-hundredth of a point and round answers to the nearest dollar.)

Hint: Since "Double-Declining Balance Method" title does not contain an "S", do not use salvage value to compute periodic depreciation expense. However, ensure that book value does not violate salvage value.

BeginningBalance

DoubleDeclining

rate:

AnnualDepreciation

Amount:EndingBalance

document.xlsx, Exercise 11-1, Page 5 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

January 1, Year 1, at a cost of $518,000 . The asset is expected to have a service life of 12 years and a salvage value of $50,000

Instructions:

Straight-line method depreciation for each of Years 1 through 3 is computed as:

Cost: AmountSalvage value: Amount

Depreciable value: FormulaAsset life: (Years) Number

Annual straight-line depreciation value: Formula

Excel formula for straight-line depreciation is =SLN(Cost,Salvage,Life)Area for Excel calculations as desired.

Cost: AmountSalvage value: Amount

Depreciable value: Formula

DenominatorDepreciation expense for year: 1 Number Number FormulaDepreciation expense for year: 2 Number Number FormulaDepreciation expense for year: 3 Number Number Formula

The Excel formula for Sum-of-Years-Digits Depreciation is =SYD(Cost,Salvage,Life,Period)

Depreciation expense for year: 1 FormulaDepreciation expense for year: 2 Formula

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

E11-1 (Depreciation Computations—SL, SYD, DDB) Lansbury Company purchases equipment on

(a) Compute the amount of depreciation for each Years 1 through 3 using the straight-line depreciation method.

(b) Compute the amount of depreciation for each Years 1 through 3 using the sum-of-years digits depreciation method.

The sum of 1 through 12 = 1+2+3+4+5+6+7+8+9+10+11+12 = 1+12 + 2+11 + 3+10 + 4+9 + 5+8 + 6+7 = (1+12) + (2+11) + (3+10) + (4+9) + (5+8) + (6+7) = (13) + (13) + (13) + (13) + (13) + (13) = 13 X (12/2) = 13 X 6 = 78 the sum of the first year and the last year multiplied by one half of the total number of years.

Hint: Since "Sum-of-Years-Digits" title contains an "S", use salvage value to compute periodic depreciation expense.

Numerator /Year

PeriodDepreciation

document.xlsx, Exercise 11-1, Page 6 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:Depreciation expense for year: 3 Formula

Cost: AmountSalvage value: Amount

Asset life: (Years) NumberAnnual Straight-line Depreciation rate: Formula

Double-Declining factor: 200%Double-Declining annual rate: Formula

Year:1 Amount Percentage Formula Formula2 Value Percentage Formula Formula3 Value Percentage Formula Formula

The Excel formula for Accelerated Depreciation is =DDB(Cost,Salvage,Life,Period,Factor)1 Formula2 Formula3 Formula

Note: Minor differences may occur due to rounding and significant digits.

(c) Compute the amount of depreciation for each Years 1 through 3 using the double-declining balance method. (In performing your calculations, round constant percentage to the nearest one-hundredth of a point and round answers to the nearest dollar.)

Hint: Since "Double-Declining Balance Method" title does not contain an "S", do not use salvage value to compute periodic depreciation expense. However, ensure that book value does not violate salvage value.

BeginningBalance

DoubleDeclining

rate:

AnnualDepreciation

Amount:EndingBalance

document.xlsx, Exercise 11-2 Solution, Page 7 of 20, 04/17/2023, 22:19:05

Name: Solution Date:

Instructor: Course:

the beginning of Year 1. The asset has an estimated service life of 5 years. An

Year1 $9,000 $15,000 $20,000 2 9,000 12,000 12,000 3 9,000 9,000 7,200 4 9,000 6,000 4,320 5 9,000 3,000 1,480

Total $45,000 $45,000 $45,000

Instructions:Answer the following questions.

100% ÷ 5 years = 20%; 20% × 200% = 40%Cost × 40% = $20,000

$20,000 ÷ 40% = $50,000

$50,000 cost [from (a)] – $45,000 total depreciation = $5,000 salvage value.

The highest charge to income for Year 1 will be yielded by the double-declining-balance method.

The highest charge to income for Year 4 will be yielded by the straight-line method.

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

E11-2 (Depreciation—Conceptual Understanding) Hasselback Company acquired a plant asset at

employee has prepared depreciation schedules for this asset using three different methods to compare the results of using one method with the results of using other methods. You are to assume that the following schedules have been correctly prepared for this asset using:

(1) the straight-line method, (2) the sum-of-the-years’-digits method, and (3) the double-declining-balance method.

Straight-Line

Sum-of-Years'-Digits

Double-Declining-Balance

(a) What is the cost of the asset being depreciated?

If there is any salvage value and the amount is unknown (as is the case here), the cost would have to be determined by looking at the data for the double-declining balance method.

(b) What amount, if any, was used in the depreciation calculations for the salvage value for this asset?

(c) Which method will produce the highest charge to income in Year 1?

(d) Which method will produce the highest charge to income in Year 4?

document.xlsx, Exercise 11-2 Solution, Page 8 of 20, 04/17/2023, 22:19:05

Name: Solution Date:

Instructor: Course:

Computations:St.-line = $50,000 – ($9,000 + $9,000 + $9,000) = $23,000 book value, end of Year 3.

S.Y.D. = $50,000 – ($15,000 + $12,000 + $9,000) = $14,000 book value, end of Year 3.

D.D.B. = $50,000 – ($20,000 + $12,000 + $7,200) = $10,800 book value, end of Year 3.

(e) Which method will produce the highest book value for the asset at the end of Year 3?

The method that produces the highest book value at the end of Year 3 would be the method that yields the lowest accumulated depreciation at the end of Year 3, which is the straight-line method.

(f) If the asset is sold at the end of Year 3, which method would yield the highest gain (or lowest loss) on disposal of the asset?

The method that will yield the highest gain (or lowest loss) if the asset is sold at the end of Year 3 is the method which will yield the lowest book value at the end of Year 3, which is the double-declining balance method in this case.

document.xlsx, Exercise 11-2, Page 9 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

the beginning of Year 1. The asset has an estimated service life of 5 years. An

Year1 $9,000 $15,000 $20,000 2 9,000 12,000 12,000 3 9,000 9,000 7,200 4 9,000 6,000 4,320 5 9,000 3,000 1,480

Total $45,000 $45,000 $45,000

Instructions:Answer the following questions.

Enter answer here.

Area for formulas as desired.Area for formulas as desired.Area for formulas as desired.

Enter answer here.

Enter answer here.

Enter answer here.

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

E11-2 (Depreciation—Conceptual Understanding) Hasselback Company acquired a plant asset at

employee has prepared depreciation schedules for this asset using three different methods to compare the results of using one method with the results of using other methods. You are to assume that the following schedules have been correctly prepared for this asset using:

(1) the straight-line method, (2) the sum-of-the-years’-digits method, and (3) the double-declining-balance method.

Straight-Line

Sum-of-Years'-Digits

Double-Declining-Balance

(a) What is the cost of the asset being depreciated?

(b) What amount, if any, was used in the depreciation calculations for the salvage value for this asset?

(c) Which method will produce the highest charge to income in Year 1?

(d) Which method will produce the highest charge to income in Year 4?

document.xlsx, Exercise 11-2, Page 10 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

Enter answer here.

Computations:Area for formulas as desired.

Area for formulas as desired.

Area for formulas as desired.

Enter answer here.

(e) Which method will produce the highest book value for the asset at the end of Year 3?

(f) If the asset is sold at the end of Year 3, which method would yield the highest gain (or lowest loss) on disposal of the asset?

document.xlsx, Exercise 11-4 Solution, Page 11 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

for $279,000 on May 1, 2012. It is estimated that it will have a useful life of 10 years, salvage value of $15,000 , production of 240,000

units, and working hours of 25,000 . During 2013, Wenner Corp. uses the machinery for2,650 hours, and the machinery produces 25,500 units.

Instructions:

$26,400

Cost: $279,000 Salvage value: 15,000

Depreciable value: 264,000 Life units expected: 240,000

Depreciation per unit: $1.10 Period units: 25,500

Period depreciation: $28,050

Cost: $279,000 Salvage value: 15,000

Depreciable value: 264,000 Hours of expected life: 25,000 Depreciation per hour: $10.56

Period hours: 2,650 Period depreciation: $27,984

First part of 2013 $264,000 × (10/55) × (1/3) = $16,000 Second part of 2013 $264,000 × (9/55) × (2/3) = $28,800

$44,800

First part of 2013 $279,000 × 20% × (1/3) = $18,600 Second part of 2013 $223,200 × 20% × (2/3) = $29,760

$48,360

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

E11-4 (Depreciation Computations—Five Methods) Wenner Furnace Corp. purchased machinery

From the information given, compute the depreciation charge for 2013 under each of the following methods. (Round to the nearest dollar.)(a) Straight-line (Note - Utilize Excel formula =SLN(Cost,Salvage,Life) to solve the problem.)

(b) Units-of-output (Note: Since units-of-production has an "s" in it, utilize salvage value in computing period depreciation.)

(c) Working hours (Note: Working hours is a "units-of-production" method and since units-of- production has an "s" in it, utilize salvage value in computing period depreciation.)

(d) Sum-of-years-digits (Note - Utilize Excel formula =SYD(Cost,Salvage,Life,Period) to solve the problem.) (Note: Second year covers two depreciation periods.)

(e) Declining balance, (10 year life, DDB results in 20% annual rate, use 200% for Factor in Excel). (Note: Utilize Excel formula =DDB(Cost,Salvage,Life,Period,Factor) to solve the problem. (Note: Second year covers two depreciation periods.)

document.xlsx, Exercise 11-4, Page 12 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

for $279,000 on May 1, 2012. It is estimated that it will have a useful life of 10 years, salvage value of $15,000 , production of 240,000

units, and working hours of 25,000 . During 2013, Wenner Corp. uses the machinery for2,650 hours, and the machinery produces 25,500 units.

Instructions:

Formula

Cost: AmountSalvage value: Amount

Depreciable value: FormulaLife units expected: Number

Depreciation per unit: FormulaPeriod units: Number

Period depreciation: Formula

Cost: AmountSalvage value: Amount

Depreciable value: FormulaHours of expected life: NumberDepreciation per hour: Formula

Period hours: NumberPeriod depreciation: Formula

First part of 2013 Formula Time period factor FormulaSecond part of 2013 Formula Time period factor Formula

Formula

First part of 2013 Formula Time period factor FormulaSecond part of 2013 Formula Time period factor Formula

Formula

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

E11-4 (Depreciation Computations—Five Methods) Wenner Furnace Corp. purchased machinery

From the information given, compute the depreciation charge for 2013 under each of the following methods. (Round to the nearest dollar.)(a) Straight-line (Note - Utilize Excel formula =SLN(Cost,Salvage,Life) to solve the problem.)

(b) Units-of-output (Note: Since units-of-production has an "s" in it, utilize salvage value in computing period depreciation.)

(c) Working hours (Note: Working hours is a "units-of-production" method and since units-of- production has an "s" in it, utilize salvage value in computing period depreciation.)

(d) Sum-of-years-digits (Note - Utilize Excel formula =SYD(Cost,Salvage,Life,Period) to solve the problem.) (Note: Second year covers two depreciation periods.)

(e) Declining balance, (10 year life, DDB results in 20% annual rate, use 200% for Factor in Excel). (Note: Utilize Excel formula =DDB(Cost,Salvage,Life,Period,Factor) to solve the problem. (Note: Second year covers two depreciation periods.)

document.xlsx, Problem 11-1 Solution, Page 13 of 20, 04/17/2023, 22:19:05

Name: Solution Date:

Instructor: Course:

Price $85,000 Credit terms 2 / 10, N / 30Freight-in costs $800 Prep and installation costs $3,800 Labor costs during regular production operations $10,500

It was expected that the machine could be used for 10 years, after which the salvagevalue would be $0 Alladin intends to use the machine only 8 years, however,after which it expects to be able to sell it for $1,500 The invoice for Machine #201 was paidMay 5, 2012. Alladin uses the calendar year as the basis for the preparation of financial statements.

Instructions:

Total Cost = Price $85,000 Less: Credit terms (1,700)

Freight-in costs 800 Prep and installation costs 3,800

87,900 Salvage value 1,500

Total Cost = $86,400 Depreciable value 86,400

Life of the asset 8 Annual depreciation exp $10,800 Partial year depreciation $7,200 8 of 12 months of 2012

$19,200 $6,400 for last 4 of 12 months of first year16,800 11,200 for first 8 of 12 months of second year

$17,600 Total for second calendar year

$21,975 $14,650 for last 8 of 12 months of first year

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

P11-1 (Depreciation for Partial Period—SL, SYD, and DDB) Alladin Company purchased Machine #201 on May 1, 2012. The following information relating to Machine #201 was gathered at the end of May.

(a) (1) Compute the depreciation expense for the years indicated using the straight-line method for 2012. (Round to the nearest dollar.)

(a) (2) Compute the depreciation expense for the years indicated using the sum-of-years'-digits method for 2013. (Round to the nearest dollar.) Utilize the Excel formula =SYD(Cost,Salvage,Life,Period).

(a) (3) Compute the depreciation expense for the years indicated using the double-declining balance method for 2012. (Round to the nearest dollar.) Utilize the Excel formula =DDB(Cost,Salvage,Life,Period).

document.xlsx, Problem 11-1 Solution, Page 14 of 20, 04/17/2023, 22:19:05

Name: Solution Date:

Instructor: Course:(b) Suppose Kate Crow, the president of Alladin, tells you that because the company is a new organization, she expects it will be several years before production and sales reach optimum levels. She asks you to recommend a depreciation method that will allocate less of the company’s depreciation expense to the early years and more to later years of the assets’ lives. What method would you recommend?

Recommendation and comments: Activity based methodology since any accelerated depreciation basis will provide more (proportionally) depreciation expense in the earlier years than straight-line. However, straight-line will not reflect lower utilization of the early years based on the assumed production peak after several years where Kate wants the expense and tax advantage to be apparent.

document.xlsx, Problem 11-1, Page 15 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

Price $85,000 Credit terms 2 / 10, N / 30Freight-in costs $800 Prep and installation costs $3,800 Labor costs during regular production operations $10,500

It was expected that the machine could be used for 10 years, after which the salvagevalue would be $0 Alladin intends to use the machine only 8 years, however,after which it expects to be able to sell it for $1,500 The invoice for Machine #201 was paidMay 5, 2012. Alladin uses the calendar year as the basis for the preparation of financial statements.

Instructions:

Total Cost = Price AmountLess: Credit terms Amount

Freight-in costs AmountPrep and installation costs Amount

FormulaSalvage value Amount

Total Cost = FormulaDepreciable value Formula

Life of the asset NumberAnnual depreciation exp FormulaPartial year depreciation Formula 8 of 12 months of 2012

Formula Formula for last 4 of 12 months of first yearFormula Formula for first 8 of 12 months of second year

Formula Total for second calendar year

Formula Formula for last 8 of 12 months of first year

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

P11-1 (Depreciation for Partial Period—SL, SYD, and DDB) Alladin Company purchased Machine #201 on May 1, 2012. The following information relating to Machine #201 was gathered at the end of May.

(a) (1) Compute the depreciation expense for the years indicated using the straight-line method for 2012. (Round to the nearest dollar.)

(a) (2) Compute the depreciation expense for the years indicated using the sum-of-years'-digits method for 2013. (Round to the nearest dollar.) Utilize the Excel formula =SYD(Cost,Salvage,Life,Period).

(a) (3) Compute the depreciation expense for the years indicated using the double-declining balance method for 2012. (Round to the nearest dollar.) Utilize the Excel formula =DDB(Cost,Salvage,Life,Period).

document.xlsx, Problem 11-1, Page 16 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

Enter text answer here.

(b) Suppose Kate Crow, the president of Alladin, tells you that because the company is a new organization, she expects it will be several years before production and sales reach optimum levels. She asks you to recommend a depreciation method that will allocate less of the company’s depreciation expense to the early years and more to later years of the assets’ lives. What method would you recommend?

document.xlsx, Problem 11-12 Solution, Page 17 of 20, 04/17/2023, 22:19:05

Name: Solution Date:

Instructor: Course:

small machine-tool manufacturer, acquired for $1,260,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $60,000 . Locke estimates that the new equipment can produce

12,000 machine tools in its first year. It estimates that production will decline by1,000 units per year over the remaining useful life of the equipment.

The following depreciation methods may be used:(1) Straight-line,(2) Double-declining balance,(3) Sum-of-years'-digits, and(4) Units-of-output.

For tax purposes, the class life is 7 years. Use the MACRS tables for computing depreciation.

Instructions:

(1) Straight-line: Cost $1,260,000 Salvage value 60,000

Depreciable value 1,200,000 Life 5

Annual depreciation expense $240,000

Year2011 $240,000 $240,000 2012 240,000 480,000 2013 240,000 720,000

$720,000

(2) Double-declining balance:

Year2011 $504,000 $504,000 2012 302,400 806,400 2013 181,440 987,840

$987,840

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

11-12 (Depreciation—SL, DDB, SYD, Act., and MACRS) On January 1, 2011, Locke Company, a

(a) Which depreciation method would maximize net income for financial statement reporting for the 3-year period ending December 31, 2013? Prepare a schedule showing the amount of accumulated depreciation at December 31, 2013, under the method selected. Ignore present value, income tax, and deferred income tax considerations.

The straight-line method would provide the highest total net income for financial reporting over the three years, as it reports the lowest total depreciation expense. These computations are provided below.

DepreciationExpense

AccumulatedDepreciation

DepreciationExpense

AccumulatedDepreciation

document.xlsx, Problem 11-12 Solution, Page 18 of 20, 04/17/2023, 22:19:05

Name: Solution Date:

Instructor: Course:(3) Sum-of-the-years’-digits:

Year2011 $400,000 $400,000 [(5/15) × $1,200,000]2012 320,000 720,000 [(4/15) × $1,200,000]2013 240,000 960,000 [(3/15) × $1,200,000]

$960,000

(4) Units-of-output:

YearCost $1,260,000 2011 12,000 $288,000 $288,000

Salvage value 60,000 2012 11,000 $264,000 552,000 Depreciable value 1,200,000 2013 10,000 $240,000 792,000

Expected life output 50,000 2014 9,000 $792,000 Unit depreciation expense $24.00 2015 8,000

Total units 50,000

General MACRS method: (Values taken from the MACRS rates schedule.)

Total Cost

2011 1,260,000 × 14.29% = $180,054 $180,054 2012 1,260,000 × 24.49% = 308,574 488,628 2013 1,260,000 × 17.49% = 220,374 709,002

$709,002

Optional straight-line method:

Total Cost

2011 1,260,000 × (1/7 X 1/2) = $90,000 $90,000 2012 1,260,000 × 1/7 = 180,000 270,000 2013 1,260,000 × 1/7 = 180,000 450,000

$450,000

DepreciationExpense

AccumulatedDepreciation

ExpectedOutput

DepreciationExpense

AccumulatedDepreciation

(b) Which depreciation method (MACRS or optional straight-line) would minimize net income for income tax reporting for the 3-year period ending December 31, 2011? Determine the amount of accumulated depreciation at December 31, 2011. Ignore present value considerations.

MACRSRates (%)

DepreciationExpense

AccumulatedDepreciation

DepreciationRate

AnnualDepreciation

AccumulatedDepreciation

The general MACRS method would have higher depreciation expense ($709,002) than that of the optional straight-line method ($450,000) for the three-year period ending December 31, 2013. Therefore, the general MACRS method would minimize net income for income tax purposes for this period.

document.xlsx, Problem 11-12, Page 19 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

small machine-tool manufacturer, acquired for $1,260,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $60,000 . Locke estimates that the new equipment can produce

12,000 machine tools in its first year. It estimates that production will decline by1,000 units per year over the remaining useful life of the equipment.

The following depreciation methods may be used:(1) Straight-line,(2) Double-declining balance,(3) Sum-of-years'-digits, and(4) Units-of-output.

For tax purposes, the class life is 7 years. Use the MACRS tables for computing depreciation.

Instructions:

(1) Straight-line: Cost AmountSalvage value Amount

Depreciable value FormulaLife Number

Annual depreciation expense Formula

Year2011 Formula Formula2012 Formula Formula2013 Formula Formula

Formula

(2) Double-declining balance:

Year2011 Formula Formula2012 Formula Formula2013 Formula Formula

Formula

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

11-12 (Depreciation—SL, DDB, SYD, Act., and MACRS) On January 1, 2011, Locke Company, a

(a) Which depreciation method would maximize net income for financial statement reporting for the 3-year period ending December 31, 2013? Prepare a schedule showing the amount of accumulated depreciation at December 31, 2013, under the method selected. Ignore present value, income tax, and deferred income tax considerations.

The straight-line method would provide the highest total net income for financial reporting over the three years, as it reports the lowest total depreciation expense. These computations are provided below.

DepreciationExpense

AccumulatedDepreciation

DepreciationExpense

AccumulatedDepreciation

document.xlsx, Problem 11-12, Page 20 of 20, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:(3) Sum-of-the-years’-digits:

Year2011 Formula Formula2012 Formula Formula2013 Formula Formula

Formula

(4) Units-of-output:

YearCost Amount 2011 Formula Formula Formula

Salvage value Amount 2012 Formula Formula FormulaDepreciable value Formula 2013 Formula Formula Formula

Expected life output Number 2014 Formula FormulaUnit depreciation expense Formula 2015 Formula

Total units Formula

General MACRS method: (Values taken from the MACRS rates schedule.)

Total Cost

2011 1,260,000 × Percentage = Formula Formula2012 1,260,000 × Percentage = Formula Formula2013 1,260,000 × Percentage = Formula Formula

Formula

Optional straight-line method:

Total Cost

2011 1,260,000 × Rate = Formula Formula2012 1,260,000 × Rate = Formula Formula2013 1,260,000 × Rate = Formula Formula

Formula

Enter text answer here.

DepreciationExpense

AccumulatedDepreciation

ExpectedOutput

DepreciationExpense

AccumulatedDepreciation

(b) Which depreciation method (MACRS or optional straight-line) would minimize net income for income tax reporting for the 3-year period ending December 31, 2011? Determine the amount of accumulated depreciation at December 31, 2011. Ignore present value considerations.

MACRSRates (%)

DepreciationExpense

AccumulatedDepreciation

DepreciationRate

AnnualDepreciation

AccumulatedDepreciation