Intermediate Accounting Solutions to Exercises 11
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Transcript of Intermediate Accounting Solutions to Exercises 11
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SOLUTIONS TO EXERCISES
EXERCISE 11-1 (1520 minutes)
(a) Straight-ine meth!" "e#re$iati!n %!r ea$h !% &ears 1 thr!ugh '
*+,000 *0000 '5.50
12
(/) Sum-!%-the-&ears-igits 12 X 1'
.2
123. X (*+,000 *0000) ++000 "e#re$iati!n &ear 1
113. X (*+,000 *0000) +0500 "e#re$iati!n &ear 2
103. X (*+,000 *0000) 55000 "e#re$iati!n &ear '
($) !u/e-e$ining 4aan$e meth!"
"e#re$iati!n rate
1006X 2 1++.6
12
*+,000 X 1++.6 .12 "e#re$iati!n &ear 1
(*+,000 .12) X 1++.6 +51*, "e#re$iati!n &ear 2
(*+,000 .12 +51*,) X 1++.6 5*2, "e#re$iati!n &ear '
EXERCISE 11-2 (2025 minutes)
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(a) I% there is an7 sa8age 8aue an" the am!unt is un9n!:n (as is the $ase here) the
$!st :!u" ha8e t! /e "etermine" /7 !!9ing at the "ata %!r the "!u/e-"e$ining /aan$e
meth!"
1006 206; 206 X 2 *06
5
C!st X *06 20000
20000 < *0 50000 C!st !% asset
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EXERCISE 11-2 (C!ntinue")
(/) 50000 $!st =%r!m (a)> *5000 t!ta "e#re$iati!n 5000 sa8age 8aue
($) The highest $harge t! in$!me %!r &ear 1 :i /e 7ie"e" /7 the "!u/e-"e$ining
/aan$e meth!"
(") The highest $harge t! in$!me %!r &ear * :i /e 7ie"e" /7 the straight-ine meth!"
(e) The meth!" that #r!"u$es the highest /!!9 8aue at the en" !% &ear ' :!u" /e themeth!" that 7ie"s the !:est a$$umuate" "e#re$iati!n at the en" !% &ear ' :hi$h is the
straight-ine meth!"
C!m#utati!ns?
St-ine 50000 (,000 @ ,000 @ ,000) 2'000 /!!9 8aue en" !% &ear '
S& 50000 (15000 @ 12000 @ ,000) 1*000 /!!9 8aue en" !% &ear '
4 50000 (20000 @ 12000 @ .200) 1000 /!!9 8aue en" !% &ear '
(%) The meth!" that :i 7ie" the highest gain (!r !:est !ss) i% the asset is s!" at the
en" !% &ear ' is the meth!" :hi$h :i 7ie" the !:est /!!9 8aue at the en" !% &ear '
:hi$h is the "!u/e-"e$ining /aan$e meth!" in this $ase
EXERCISE 11-' (1520 minutes)
(a)20 (20 @ 1)
2102
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'3* X 203210 X (.11000 +0000) *+500 %!r 201*
13* X 203210 X (.11000 +0000) 15500
@ '3* X 1,3210 X (.11000 +0000) **1.5
5,+.5 %!r 2015
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EXERCISE 11-' (C!ntinue")
(/)1006
56; 56 X 2 106
20
'3* X 106 X .11000 5''25 %!r 201*
106 X (.11000 5''25) +5.+ %!r 2015
EXERCISE 11-* (1525 minutes)
(a) '15000 15000 '00000; '00000 < 10 7rs '0000
(/) '00000 < 2*0000 units 125; 25500 units X 125 '1.5
($) '00000 < 25000 h!urs 1200 #er hr; 2+50 hrs X 1200 '100
(") 10 @ , @ @ . @ + @ 5 @ * @ ' @ 2 @ 1 55 ORn(n @ 1)
10(11) 55
2 2
10X '00000 X 13' 112
55
, X '00000 X 23' '2.2.
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55
T!ta %!r 2015 50,0,
(e) '15000 X 206 X 13' 21000
='15000 ('15000 X 206)> X 206 X 23' ''+00
T!ta %!r 2015 5*+00
=Aa7 as! /e $!m#ute" as 206 !% ('15000 23' !% 206 !% '15000)>
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EXERCISE 11-5 (2025 minutes)
(a)(11.,00 12,00)
2100037r 21000 X 5312 .50
5
201* e#re$iati!nBStraight ine .50
(/)(11.,00 12,00)
5003hr21000
201* e#re$iati!nBAa$hine Usage 00 X 500 *000
($) Aa$hine !$ate" t!
&ear T!ta 201* 2015
1 5315 X 105000 '5000 1*5'D 20*1.DD
2 *315 X 105000 2000 11++.DDD
1*5' '20*
D '5000 X 5312 1*5'
DD '5000 X .312 20*1.
DD
D
2000 X 5312 11++.
2015 e#re$iati!nBSum-!%-the-&ears-igits '20*
(") 201* *06 X (11.,00) X 5312 1,+50
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2015 *06 X (11.,00 1,+50) ','00
OR
1st%u 7ear (*06 X 11.,00) *.1+0
2n"%u 7ear =*06 X (11.,00 *.1+0)> 22,+
201* e#re$iati!n 5312 X *.1+0 1,+50
2015 e#re$iati!n .312 X *.1+0 2.510
5312 X 22,+ 11.,0
','00
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EXERCISE 11-+ (20'0 minutes)
(a) 201* Straight-ine212000 12000
2500037ear
' m!nthsBe#re$iati!n +250 (25000 X '312)
(/) 201* Out#ut212000 12000
5003!ut#ut unit*0000
1000 units X 500 5000
($) 201* F!r9ing h!urs212000 12000
10003h!ur20000
525 h!urs X 1000 5250
(") @ . @ + @ 5 @ * @ ' @ 2 @ 1 '+ ORn (n @ 1)
(,)
'+2 2
!$ate" t!
Sum-!%-the-7ears-"igits T!ta 201* 2015 201+
&ear 1 3'+ X 200000 ***** 11111 '''''
2 .3'+ X 200000 ', ,.22 2,1+.
' +3'+ X 200000 ''''' '''
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11111 *'055 '.500
201+? '.500 (,312 !% 2n"7ear !% ma$hines i%e #us '312 !% 'r"7ear !% ma$hines
i%e)
(e) !u/e-"e$ining /aan$e 2015? 13 X 2 256
201*? 256 X 212000 X '312 1'250
2015? 256 X (212000 1'250) *,+
OR
1st%u 7ear (256 X 212000) 5'000
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T!ta Straight Line 1,.5
!u/e-e$ining 4aan$e %!r 201* 1*250 (1*2500 X 2 X 5)
!u/e-e$ining 4aan$e %!r 2015 25+50 =(1*2500 1*250) X 2>
T!ta !u/e e$ining 4aan$e ',,00
Sum-!%-the-7ears-"igits %!r 201* 11500 =(1*2500 1+000) X
10355 X 5>
Sum-!%-the-7ears-"igits %!r 2015 2150 (12+500 X 10355 X 132) @
(12+500 X ,355 X 5)
T!ta Sum-!%-the-7ears-"igits '''50
Aeth!" use" must /e S&
Using S& 201+ e#re$iati!n is 1,550 (12+500 X ,355 X 132)
@ (12+500 X 355 X 5)
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EXERCISE 11- (2025 minutes)
O" Aa$hine
Kune 1 2012 Gur$hase '1000
reight 200
Instaati!n 500
T!ta $!st '1.00
nnua "e#re$iati!n $harge? ('1.00 2500) < 10 2,20
On Kune 1 201' "e/it the !" ma$hine %!r 1,0; the re8ise" t!ta $!st is ''+0
('1.00 @ 1,0); thus the re8ise" annua "e#re$iati!n $harge is? (''+0 2500
2,20) < , '1*0
4!!9 8aue !" ma$hine Kune 1 201+?
=''+0 2,20 ('1*0 X ')> 21'*0
Less? air 8aue 20000
L!ss !n e$hange 1'*0
C!st !% rem!8a .5
T!ta !ss 1*15
(N!te t! instru$t!r? The a/!8e $!m#utati!n is "!ne t! "etermine :hether there is a gain !r!ss %r!m the e$hange !% the !" ma$hine :ith the ne: ma$hine an" t! sh!: h!: the $!st
!% rem!8a might /e re#!rte" s! i% a gain !$$urs the gain is n!t "e%erre" (1) /e$ause the
e$hange has $!mmer$ia su/stan$e an" (2) the $!st #ai" e$ee"s 256 !% the t!ta 8aue !%
the #r!#ert7 re$ei8e")
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EXERCISE 11-, (1520 minutes)
(a) sset C!st
Estimate"
Sa8age
e#re$ia/e C!st Estimate"
Li%e
e#re$iati!n #er
&ear
*0500 5500 '5000 10 '500
4 ''+00 *00 200 , '200
C '+000 '+00 '2*00 , '+00
1,000 1500 1.500 . 2500
E 2'500 2500 21000 + '500
152+00 1.,00 1'*.00 1+'00
C!m#!site i%e 1'*.00 < 1+'00 !r 2+ 7ears
C!m#!site rate 1+'00 < 152+00 !r a##r!imate7 10.6
(/) e#re$iati!n E#ense 1+'00
$$umuate" e#re$iati!nBGant
ssets 1+'00
($) Cash *00
$$umuate" e#re$iati!nBGant ssets 1*200
Gant ssets 1,000
EXERCISE 11-10 (1015 minutes)
Sum-!%-the-7ears-"igits X , '+
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2
Using & t! stan" %!r the 7ears !% remaining i%e?
&3'+ X (*'0000 .0000) +0000
Auti#7ing /!th si"es /7 '+?
'+0000 X & 21+0000
& 21+0000 < '+0000
& +
The 7ear in :hi$h there are si remaining 7ears !% i%e at the /eginning !% that gi8en 7ear is
201'
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EXERCISE 11-11 (1015 minutes)
(a) N! $!rre$ting entr7 is ne$essar7 /e$ause $hanges in estimate are han"e" in the
$urrent an" #r!s#e$ti8e #eri!"s
(/) Re8ise" annua $harge
4!!9 8aue as !% 13132015 =+0000 (.000 X 5)> 25000
Remaining use%u i%e 5 7ears (10 7ears 5 7ears)
Re8ise" sa8age 8aue *500
(25000 *500) < 5 *100
e#re$iati!n E#ense *100
$$umuate" e#re$iati!nBAa$hiner7 *100
EXERCISE 11-12 (2025 minutes)
(a) 1,1,,.B(2000000 +0000) < *0 *50037r
(/) 1,,2015B4ui"ing (2000000 +0000) < *0 *50037r
""iti!n (500000 20000) < '0 1+00037r
+*50037r
($) N! entr7 reHuire"
(") Re8ise" annua "e#re$iati!n
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4ui"ing
4!!9 8aue? (2000000 1'5000D) +*2000
Sa8age 8aue +0000
52000
Remaining use%u i%e '2 7ears
nnua "e#re$iati!n 11
D*500 X 2 7ears 1'5000
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EXERCISE 11-12 (C!ntinue")
""iti!n
4!!9 8aue? (500000 2000DD) 212000
Less? Sa8age 8aue 20000
1,2000
Remaining use%u i%e < '2 7ears
nnua "e#re$iati!n +000
DD1+000 X 1 7ears 2000
nnua "e#re$iati!n e#enseB/ui"ing (11 @ +000) 2*1
EXERCISE 11-1' (1520 minutes)
(a) 2200000 < *0 55000
(/) L!ss !n is#!sa !% Gant ssets 0000
$$umuate" e#re$iati!nB4ui"ings
(1+0000 X 203*0) 0000
4ui"ings 1+0000
4ui"ings '00000
Cash '00000
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N!te? The m!st a##r!#riate entr7 :!u" /e t! rem!8e the !" r!!% an" re$!r" a !ss
!n "is#!sa /e$ause the $!st !% the !" r!!% is gi8en n!ther aternati8e :!u" /e t! "e/it
$$umuate" e#re$iati!nB4ui"ings !n the the!r7 that the re#a$ement eten"s the
use%u i%e !% the /ui"ing The entr7 in this $ase :!u" /e as %!!:s?
$$umuate" e#re$iati!nB4ui"ings '00000
Cash '00000
s in"i$ate" this a##r!a$h "!es n!t seem as a##r!#riate as the %irst a##r!a$h
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EXERCISE 11-1' (C!ntinue")
($) N! entr7 ne$essar7
(") (ssume the $!st !% the !" r!!% is rem!8e")
4ui"ings (2200000 1+0000 @ '00000) 2'*0000
Less? $$umuate" e#re$iati!n
(55000 X 20 0000) 1020000
1'20000
Remaining use%u i%e < 25 7ears
e#re$iati!nB2015 (1'20000 < 25) 5200
OR
(ssume the $!st !% the ne: r!!% is "e/ite" t!
$$umuate" e#re$iati!nBEHui#ment)
4!!9 8aue !% the /ui"ing #ri!r t! the re#a$ement !%
r!!% 2200000 (55000 X 20) 1100000
C!st !% ne: r!!% '00000
1*00000
Remaining use%u i%e < 25 7ears
e#re$iati!nB2015 (1*00000 < 25) 5+000
EXERCISE 11-1* (2025 minutes)
(a) Aaintenan$e an" Re#airs E#ense 500
EHui#ment 500
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(/) The #r!#er en"ing /aan$e in the asset a$$!unt is?
Kanuar7 1 /aan$e 1'*.50
""? Ne: eHui#ment?
Gur$hases '2000
reight .00
Instaati!n 2.00 '5*00
Less? C!st !% eHui#ment s!" 2'000
e$em/er '1 /aan$e 1*.150
(1) Straight-ine? 1*.150 < 10 1*.15
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EXERCISE 11-1* (C!ntinue")
(2) Sum-!%-the-7ears-"igits? 10 @ , @ @ . @ + @ 5 @ * @ ' @ 2 @ 1 55
ORn(n @ 1)
10(11)
552 2
!r eHui#ment #ur$hase" in 201'? 111.50 (1'*.50 2'000) !% the $!st !%
eHui#ment #ur$hase" in 201' is sti !n han"
355 X 111.50 1+255
!r eHui#ment #ur$hase" in 2015? 10355 X '5*00 +*'+
T!ta 22+,1
EXERCISE 11-15 (25'5 minutes)
(a)
200,
20102015
In$ 201+ T!ta
(1) 1,2000 1+00 1.5200
1.5200 < 12 1*+00
#er 7r (*0 #er "a7)
1''D3'+5 !% 1*+00 5'20
20102015 In$u"e (+ X 1*+00) .+00
+3'+5 !% 1*+00 2.20 ,5+*0
(2) 0 .+00 1*+00 102200
(') 1*+00 .+00 0 102200
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(*) .'00 .+00 .'00 102200
(5) *312 !% 1*+00 *+.
20102015 In$ .+00
'312 !% 1*+00 '+50 ,+11.
(+) 0 .+00 0 .+00
D(11 @ '0 @ '1 @ '0 @ '1)
(/) The m!st a$$urate "istri/uti!n !% $!st is gi8en /7 meth!"s 1 an" 5 i% it is assume"
that straight-ine is satis%a$t!r7 Reas!na/e a$$ura$7
is n!rma7 gi8en /7 2 ' !r * The sim#est !% the a##i$ati!ns are + 2 ' * 5 an" 1 in
a/!ut that !r"er Aeth!"s 2 ' an" * $!m/ine reas!na/e a$$ura$7 :ith sim#i$it7 !%
a##i$ati!n
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EXERCISE 11-1+ (1015 minutes)
(a) e$em/er '1 201*
L!ss !n Im#airment '200000
$$umuate" e#re$iati!nBEHui#ment '200000
C!st ,000000
Less? $$umuate" "e#re$iati!n 1000000
Carr7ing am!unt 000000
Less? air 8aue *00000
L!ss !n im#airment '200000
(/) e$em/er '1 2015
e#re$iati!n E#ense 1200000
$$umuate" e#re$iati!nBEHui#ment 1200000
Ne: $arr7ing am!unt *00000
Use%u i%e < * 7ears
e#re$iati!n #er 7ear 1200000
($) N! entr7 ne$essar7 Rest!rati!n !% an7 im#airment !ss is n!t #ermitte"
EXERCISE 11-1. (1520 minutes)
(a) L!ss !n Im#airment '220000
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$$umuate" e#re$iati!nBEHui#ment '220000
C!st ,000000
$$umuate" "e#re$iati!n 1000000
Carr7ing am!unt 000000
Less? air 8aue *00000
Gus? C!st !% "is#!sa 20000
L!ss !n im#airment '220000
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EXERCISE 11-1. (C!ntinue")
(/) N! entr7 ne$essar7 e#re$iati!n is n!t ta9en !n assets inten"e" t! /e s!"
($) $$umuate" e#re$iati!nBEHui#ment 500000
Re$!8er7 !% L!ss %r!m Im#airment 500000
air 8aue 5'00000
Less? C!st !% "is#!sa 20000 520000
Less? Carr7ing am!unt *.0000
Re$!8er7 !% !ss !n im#airment 500000
EXERCISE 11-1 (1520 minutes)
(a) e$em/er '1 201*
L!ss !n Im#airment 2.0000
$$umuate" e#re$iati!nBEHui#ment 2.0000
C!st ,00000
Less? $$umuate" "e#re$iati!n *00000
Carr7ing am!unt 500000
Less? air 8aue 2'0000
L!ss !n im#airment 2.0000
(/) It ma7 /e re#!rte" in the !ther e#enses an" !sses se$ti!n !r it ma7 /e highighte"
as an unusua item in a se#arate se$ti!n It is n!t re#!rte" as an etra!r"inar7 item
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($) N! entr7 ne$essar7 Rest!rati!n !% an7 im#airment !ss is n!t #ermitte"
(") Aanagement %irst ha" t! "etermine :hether there :as an im#airment T! e8auate
this ste# management "!es a re$!8era/iit7 test The re$!8era/iit7 test estimates the
%uture $ash %!:s e#e$te" %r!m use !% that asset an" its e8entua "is#!siti!n I% the sum !%
the e#e$te" %uture net $ash %!:s (un"is$!unte") is ess than the $arr7ing am!unt !% the
asset an im#airment resuts I% the re$!8era/iit7 test in"i$ates that an im#airment has
!$$urre" a !ss is $!m#ute" The im#airment !ss is the am!unt /7 :hi$h the $arr7ing
am!unt !% the asset e$ee"s its %air 8aue
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EXERCISE 11-1, (1520 minutes)
(a) e#re$iati!n E#ense?*000
200 #er 7ear
'0 7ears
C!st !% Tim/er S!"? 1*00 *00 1000
1000 X ,000 a$res ,000000 !% 8aue !% tim/er
(,000000 < '500000 /" %t) X .00000 /" %t 100000
(/) C!st !% Tim/er S!"? ,000000 100000 .200000
.200000 @ 100000 .'00000
(.'00000 < 5000000 /" %t) X ,00000 /" %t 1'1*000
N!te? The s#ra7ing $!sts as :e as the $!sts t! maintain the %ire anes an" r!a"s are
e#ense" ea$h #eri!" an" are n!t #art !% the "e#eti!n /ase
EXERCISE 11-20 (1015 minutes)
C!st #er /arre !% !i?
Initia #a7ment 500000 200250000
Renta '1500 1.5
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1000
Gremium 56 !% 55 2.5
Re$!n"iti!ning !% an" '0000
12250000
T!ta $!st #er /arre ++2
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EXERCISE 11-21 (1520 minutes)
(a) 1'00 '00 1000 #er a$re %!r tim/er
1000 X .000 a$resX 50000 /" %t
000 /" %t X .000 a$res
.000000X 50000 /" %t 10+250
5+000000 /" %t
(/).*00
X 50000 /" %t 11,05+000000 /" %t
($) !r"a sh!u" $a#itaiMe the $!st !% .0000 (20 X '500 trees) an" a"ust the
"e#eti!n the net time the tim/er is har8este"
EXERCISE 11-22 (1520 minutes)
e#eti!n /ase? 11,0000 @ ,0000 100000 @ 200000 1'0000
e#eti!n rate? 1'0000 < +0000 2'3t!n
(a) Ger unit materia $!st? 2'3t!n
(/) 123'131* in8ent!r7? 2' X 000 t!ns 1*000
($) C!st !% g!!"s s!" 201*? 2' X 22000 t!ns 50+000
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EXERCISE 11-2' (1520 minutes)
(a),.0000 @ 1.0000 @ *0000D 100000
0, "e#eti!n #er unit12000000
DN!te t! instru$t!r? The *0000 sh!u" /e "e#ete" /e$ause it is a asset retirement
!/igati!n
2500000 units etra$te" X 0, 225000 "e#eti!n %!r 201*
(/) 2100000 units s!" X 0, 1,000 $harge" t! $!st !% g!!"s s!" %!r 201*
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EXERCISE 11-2* (1525 minutes)
(a) sset turn!8er?
52* +15, times
5 @ 5.,
2
(a) Return !n assets?
*', 5126
5 @ 5.,
2
(/) Gr!%it margin !n saes?
*', '16
52*
($) The asset turn!8er times the #r!%it margin !n saes #r!8i"es the rate !% return !n
assets $!m#ute" %!r T!!tsie R! as %!!:s?
Gr!%it margin !n saes X sset Turn!8er Return !n ssets
'16 X +15, 5126
N!te the ans:er 5126 is the same as the rate !% return !n assets $!m#ute" in (/) a/!8e
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DEXERCISE 11-25 (2025 minutes)
201* 2015
(a) Re8enues 200000 200000
O#erating e#enses (e$u"ing "e#re$iati!n) 1'0000 1'0000
e#re$iati!n =(2.000 +000) < .> '000 '000
In$!me /e%!re in$!me taes +.000 +.000
201* 2015
(/) Re8enues 200000 200000
O#erating e#enses (e$u"ing "e#re$iati!n) 1'0000 1'0000
e#re$iati!nD 5*00 +*0
Taa/e in$!me +*+00 +1'+0
D201* 2.000 X 20 5*00
2015 2.000 X '2 +*0
($) 4!!9 #ur#!ses (2.000 +000) 21000
Ta #ur#!ses (entire $!st !% asset) 2.000
(") i%%eren$es :i !$$ur %!r the %!!:ing reas!ns?
1 "i%%erent "e#re$iati!n meth!"s
2 ha%-7ear $!n8enti!n use" %!r ta #ur#!ses
' estimate" use%u i%e an" ta i%e "i%%erent
* ta s7stem ign!res sa8age 8aue
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8/9/2019 Intermediate Accounting Solutions to Exercises 11
37/38
DEXERCISE 11-2+ (1520 minutes)
(a) (1) ('1000 1000) X 1310 X 10312 2500 "e#re$iati!n e#ense %!r /!!9
#ur#!ses
(2) '1000 X 135 X 132 '100 "e#re$iati!n %!r ta #ur#!ses
-
8/9/2019 Intermediate Accounting Solutions to Exercises 11
38/38
DEXERCISE 11-2+ (C!ntinue")
(/) (1) '1000 X 206 X 10312 51+. "e#re$iati!n e#ense %!r /!!9 #ur#!ses
(2) '1000 X *06 X 132 +200 "e#re$iati!n e#ense %!r ta #ur#!ses
($) i%%eren$es :i !$$ur %!r the %!!:ing reas!ns?
1 ha%-7ear $!n8enti!n use" %!r ta #ur#!ses
2 estimate" use%u i%e an" ta i%e "i%%erent
' ta s7stem ign!res sa8age 8aue