Page 82 - Account for Ag - 2019

12-20 Accounting for Agriculture CH 12]

EXERCISES

1. A building acquired on January 1 at a cost of $60,000 has an estimated life of 40 years. Assuming that it will have no salvage value,
determine the depreciation for each of the first two years (a) by the straight line method and (b) by the sum-of-years digits method.

2. Fresno Farm, Inc., purchased a special machine capable of processing 1,000,000 pounds of nuts. The cost was $48,000. Trade-in value is
estimated at $8,000. Using the output method, what is the depreciation charge for each of the first two years:

Year 1 23,430 pounds processed on this machine
Year 2 19,670 pounds processed on this machine

3. On July 19 of the current fiscal year Paul Rogers traded an old bookkeeping computer for a new one with a list price of $1,800. He
received a trade-in allowance of $315, paying the balance in cash. The following information about the old equipment is obtained from
the account in the office equipment ledger: cost, $900; allowance for depreciation on December 31, the close of the previous fiscal period,
$733.32; monthly depreciation, $8.33. Prepare general journal entries: (a) to record depreciation on the old machine for the current year;
(b) to record the transaction on July 19 by the accounting method, (c) to record the transaction on July 19.

4. A diesel motor that cost $8,900 is expected to run for a useful life of 400,000 hours. Scrap value is estimated at $500. During December,
the motor was operated for 376 hours. What depreciation charge should be made that month?

5. A fixed asset acquired at a cost of $12,000 has an estimated life of 10 years and an estimated salvage value of $2,000. (a) What is the
annual depreciation according to the straight line method? (b) The annual depreciation charge obtained in (a) is what percent of the cost of
the asset? (c) What is the amount of the depreciation for the first year according to the sum of the years digits method?

PROBLEMS

12-1. An item of new equipment acquired at a cost of $27,000 by California Commodity Trading Co. at the beginning of a fiscal year has an
estimated life of 4 years and an estimated salvage value of $2,000.

Determine for each of the four years the depreciation per year and the book value of the equipment at the end of the year according to (1)
straight line method, (2)200% declining balance method, (3)sum of years-digits method, and (4)ACRS method. — use 3 year table. Present
your figures in tabular form, using the following headings for each of the four tables.

Depr. % Depreciation Book Value
Year or Factor Expense End of Year
1
2
3
4

12-2. In each of the following unrelated cases it is assumed that subsidiary equipment ledgers are maintained, that depreciation is recorded
annually except for items disposed of during the year, and that the fiscal year ends on December 31.
(a) Apr. 24. A Pickup truck is sold for cash, $300. The following details are taken from the subsidiary account: cost, $1,500; accumulated
allowance for depreciation on previous December 31, $1,300; monthly depreciation, $25. Give the necessary entries in general journal form.
(b) July 19. Discarded old pumps, realizing no salvage. The subsidiary account reveals the following: cost, $200; accumulated allowance for
depreciation on previous December 31, $153; monthly depreciation, $3. Give the necessary entries in general journal form.
(c) Oct. 4. Traded in an old scale for a new one priced at $1,000. Received a trade-in allowance of $100, paying $900 cash. The subsidiary account
shows the following: cost, $800; accumulated allowance for depreciation on previous December 31, $640; monthly depreciation, $8. Give the
necessary entries in general journal form to recognize the gain or the loss on the old register and to record the new one at $1,000.
(d) Nov. 24. Discarded a computer, realizing no salvage. The following details are taken from the subsidiary account: cost, $2,125;
accumulated allowance for depreciation on previous December 31, $2,125. Give the necessary general journal entry.
(e) December 28. Traded in an old delivery truck for a new one priced at $2,300. Received a trade-in allowance of $500, paying $1,800 cash. The
subsidiary account shows the following: cost, $2,700; accumulated allowance for depreciation on previous December 31, $1,750; monthly
depreciation, $50. Give the necessary entries in general journal form.

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