Question Details

ACCT 550
WEEK 7
E11-4 (Depreciation Computations—Five Methods)Wenner Furnace Corp. purchased machinery 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 for 2,650 hours, and the machinery produces 25,500 units.
Instructions
From the information given, compute the depreciation charge for 2013 under each of the following methods. (Round to the nearest dollar.)
E11-9 (Composite Depreciation) Presented below is information related to Morrow Manufacturing Corporation.
Machine	Cost		Estimated Salvage Value	Estimated Life (in years)
A		$40,500	$5,500				10
B		  33,600	  4,800				9
C		  36,000	  3,600				8
D		  19,000	  1,500				7
E		  23,500	  2,500				6
Instructions
(a)	Compute the rate of depreciation per year to be applied to the machines under the composite method
(b)	Prepare the adjusting entry necessary at the end of the year to record depreciation for the year.

(c)	Prepare the entry to record the sale of Machine D for cash of $5,000. It was used for 6 years, and depreciation was entered under the composite method.

E11-11 (Depreciation—Change in Estimate) Machinery purchased for $52,000 by Carver Co. in 2008 was originally estimated to have a life of 8 years with a salvage value of $4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2013, it is determined that the total estimated life should be 10 years with a salvage value of $4,500 at the end of that time. Assume straight-line depreciation.
(a)	Prepare the entry to correct the prior years’ depreciation, if necessary.
(b)	Prepare the entry to record depreciation for 2013.
Revised annual charge
Book value as of 1/1/2013 ($52,000 - ($6,000 x 5) = $22,000
Remaining useful life, 5 years (10 years - 5 years)
Revised salvage value, $4,500
($22,000 - $4,500 / 5 = $3,500
E11-17 (Impairment) Assume the same information as E11-16, except that Pujols intends to dispose of 
the equipment in the coming year. It is expected that the cost of disposal will be $20,000.
Cost					$9,000,000
Accumulated depreciation to date		1,000,000
Expected future net cash flows		7,000,000
Fair value					4,400,000
Instructions
Prepare the journal entry (if any) to record the impairment of the asset at December 31, 

(a)	2012.
No entry necessary because depreciation is not taken on assets intended to be sold.
(b)	Prepare the journal entry (if any) to record depreciation expense for 2013.
The asset was not sold by December 31, 2013. The fair value of the equipment on that 
date is $5,100,000. Prepare the journal entry (if any) necessary to record this increase in 
(c)	fair value. It is expected that the cost of disposal is still $20,000.