BE11.1 (LO 1) Fernandez Corporation purchased a truck at the beginning of 2020 for $50,000.
The
truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven
23,000 miles in 2020 and 31,000 miles in 2021. Compute depreciation expense using the units-of-
production method for 2020 and 2021.
2020: (50,000 – 2000) x 23,000/160,000 = 6,900
2021: (50,000 – 2000) x 31,000/160,000 = 9,300
BE11.2 (LO 1) Lockard Company purchased machinery on January 1, 2020, for $80,000. The machinery
is estimated to have a salvage value of $8,000 after a useful life of 8 years. (a) Compute 2020
depreciation expense using the straight-line method. (b) Compute 2020 depreciation expense using
the straight-line method assuming the machinery was purchased on September 1, 2020.
a) (80,000-8,000)/8 = 9,000
b) 9,000 x 4/12 = 3,000
BE11.3 (LO 1) Use the information for Lockard Company given in BE11.2. (a) Compute 2020
depreciation expense using the sum-of-the-years’-digits method. (b) Compute 2020 depreciation
expense using the sum-of-the-years’-digits method, assuming the machinery was purchased on April
1, 2020.
a) $80,000 – $8,000) X 8/36* = $16,000
b) [($80,000 – $8,000) X 8/36] X 9/12 = $12,000
BE11.4 (LO 1) Use the information for Lockard Company given in BE11.2. (a) Compute 2020
depreciation expense using the double-declining-balance method. (b) Compute 2020 depreciation
expense using the double-declining-balance method, assuming the machinery was purchased on
October 1, 2020.
a) $80,000 X 25%* = $20,000 *(1/8 X 2)
b) ($80,000 X 25%) X 3/12 = $5,000
BE11.5 (LO 1) Cominsky Company purchased a machine on July 1, 2021, for $28,000. Cominsky paid
$200 in title fees and county property tax of $125 on the machine. In addition, Cominsky paid $500
shipping charges for delivery, and $475 was paid to a local contractor to build and wire a platform for
the machine on the plant fl oor. The machine has an estimated useful life of 6 years with a salvage
value of $3,000. Determine the depreciation base of Cominsky’s new machine. Cominsky uses
straight-line depreciation.
Depreciable Base =
($28,000 + $200 + $125 +
$500 + $475) – $3,000 =
$26,300.
Depreciable Base =
($28,000 + $200 + $125 +
$500 + $475) – $3,000 =
$26,300.
Depreciable Base = ($28,000 + $200 + $125 + $500 + $475) – $3,000 = $26,300.
BE11.10 (LO 5) In its 2017 annual report, Campbell Soup Company reports beginning-of-the-year total
assets of $7,837 million, end-of-the-year total assets of $7,726 million, total sales of $7,890 million,
and net income of $887 million. (a) Compute Campbell’s asset turnover. (b) Compute Campbell’s profi
t margin on sales. (c) Compute Campbell’s return on assets using (1) asset turnover and profi t margin
and (2) net income. (Round to two decimal places.)
a) Asser turnover = 7,890/(7,837+7,726/2) = 1.01
b) Profit margin on sales = 887/7,890 = 11.24%
c) 1. ROA = 1.01 x 11.24% = 11.3%
2. ROA = 887/(7,837+7,726/2)= 11.3%
E11.1 (LO 1) Excel (Depreciation Computations—SL, SYD, DDB) Deluxe Ezra Company purchases
equipment on January 1, Year 1, at a cost of $469,000. The asset is expected to have a service life of
12 years and a salvage value of $40,000.
Instructions:
a. Compute the amount of depreciation for each of Years 1 through 3 using the straight-line
depreciation method. b. Compute the amount of depreciation for each of Years 1 through 3 using the
sum-of-the-years’- digits method. c. Compute the amount of depreciation for each of Years 1 through
3 using the double-decliningbalance method. (In performing your calculations, round constant
percentage to the nearest one-hundredth of a point and round answers to the nearest dollar.)
Straight-line method
depreciation for each of
Years 1 through 3 =
12 a) (469,000 – 40,000)/12 = 35,750
b) Sum of the year digit = 12*13/2 = 78
12/78 X ($469,000 – $40,000) = $66,000 depreciation Year 1
11/78 X ($469,000 – $40,000) = $60,500 depreciation Year 2
10/78 X ($469,000 – $40,000) = $55,000 depreciation Year 3
c) Rate = 1/12*2 = 16.67%
$469,000 X 16.67% = $78,182 depreciation Year 1
($469,000 – $78,182) X 16.67% = $65,149 depreciation Year 2
($469,000 – $78,182 – $65,149) X 16.67% = $54,289 depreciation Year 3
E11.4 (LO 1, 2) Excel (Depreciation Computations—Five Methods) Jon Seceda Furnace Corp. purchased
machinery for $315,000 on May 1, 2020. 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 2021,
Seceda Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units
Instructions: From the information given, compute the depreciation charge for 2021 under each of the
following methods. (Round to the nearest dollar.)
a. Straight-line. b. Units-of-output c. Working hours. d. Sum-of-the-years’-digits. e. Declining-balance
(use 20% as the annual rate).
(a) $315,000 – $15,000 =
$300,000; $300,000 ÷ 10
yrs. = $30,000
(a) $315,000 – $15,000 = $300,000; $300,000 ÷ 10 yrs. = $30,000
(b) $300,000 ÷ 240,000 units = $1.25; 25,500 units X $1.25 = $31,875
(c) $300,000 ÷ 25,000 hours = $12.00 per hr.; 2,650 hrs. X $12.00 = $31,800
(c) $300,000 ÷ 25,000 hours = $12.00 per hr.; 2,650 hrs. X $12.00 = $31,800
(d) Sum of the year digit = 10*(10+1)/2 = 55
(9 + (4/12))/55 x 300,000 = 50,909
( e ) 315,000 x 20% x 8/12 = 42,000
(315,000-42,000) x 20% = 54,600
