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Beeman Company exchanged machinery with an appraised value of $3,510,000, a recorded cost of $5,400,000 and accumulated depreciation of $2,700,000 with Lacey Corporation for machinery Lacey owns. The machinery has an appraised value of $3,390,000, a recorded cost of $6,480,000, and accumulated depreciation of $3,564,000. Lacey also gave Beeman $120,000 in the exchange. Assume depreciation has already been updated
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Accounting 3301 EXAM 1 Beeman Company exchanged machinery with an appraised value of $3,510,000, a recorded cost of $5,400,000 and accumulated depreciation of $2,700,000 with Lacey Corporation for machinery Lacey owns. The machinery has an appraised value of $3,390,000, a recorded cost of $6,480,000, and accumulated depreciation of $3,564,000. Lacey also gave Beeman $120,000 in the exchange. Assume depreciation has already been updated. Instructions (a) Prepare the entries on both companies' books assuming that the exchange had commercial substance. (Round all computations to the nearest dollar.) (b) Prepare the entries on both companies' books assuming that the exchange lacked commercial substance. (Round all computations to the nearest dollar.) Solution 10- (a) Commercial Substance Beeman Machinery.............................................. 3,390,000 Cost $5,400, Cash.......................................................... 120,000 A/D 2,700, Accum. Depreciation— BV 2,700, Machinery......................................... 2,700,000 FV 3,510, Gain on Disposal of Gain $ 810, Machinery......................... 810, Machinery............................ 5,400, Lacey Machinery.............................................. 3,510,000 Cost $6,480, Accum. Depreciation— A/D 3,564, Machinery......................................... 3,564,000 BV 2,916, Gain on Disposal of FV 3,390, Machinery......................... 474,000 Gain $ 474, Machinery............................ 6,480, Cash........................................ 120, (b) No Commercial Substance Beeman Machinery...................................................................................................... 2,607, Cash.................................................................................................................. 120, Accumulated Depreciation—Machinery........................................... 2,700, Gain on Disposal of Machinery............................................ 27, Machinery.................................................................................... 5,400, $120,000 ÷ ($120,000 + $3,390,000) × $810,000 = $27, Lacey Machinery...................................................................................................... 3,036, Accumulated Depreciation—Machinery........................................... 3,564, Machinery.................................................................................... 6,480, Cash................................................................................................ 120,
A machine which cost $300,000 is acquired on October 1, 2014. Its estimated salvage value is $30,000 and its expected life is eight years. Instructions (1) Calculate depreciation expense for 2014 and 2015 by each of the following methods, showing the figures used. (a) Double-declining balance (b) Sum-of-the-years'-digits (2) At the end of 2015, which method results in the larger accumulated depreciation amount? Solution 11- (1) (a) 2014: 25% × $300,000 × ¼ = $18, 2015: 25% × $187,500 = $70, (b) 2014: 8/36 × $270,000 × ¼ = $15, 2015: 8/36 × $270,000 × ¾ = $45, 7/36 × $270,000 × ¼ = 13, $58, (2) Double-declining balance Calculation: $18, $70, Larger accumulated depreciation $89,063 DDB $15, $58, $73,125 SYD
Ex. 11-131 —Asset depreciation and disposition. Answer each of the following questions.