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Financial Accounting Canadian 5th Edition Harrison Solutions Manual 1
Financial Accounting Canadian 5th Edition Harrison Solutions Manual 1
Financial Accounting Canadian 5th Edition Harrison Solutions Manual 1
Chapter 7
After the land is ready for use, the related costs (listed
above) would be expensed.
Market
Value
Land .......................... $ 75,000
Building ..................... 60,000
Equipment ................ 15,000
Total .......................... $150,000
Balance Sheet
Current assets CORRECT Total liabilities CORRECT
Property, Plant, OVERSTATED Shareholders’ equity OVERSTATED
and Equipment
Total liabilities
Total assets OVERSTATED and shareholders’
equity OVERSTATED
(c) Double-Diminishing-balance
($25,000,000 / 5 years) 2........................... $10,000,000
2. Carrying amount:
Double-
Straight- Units-of- Diminishing
Line Production Balance
Less Accumulated
Depreciation ........... (4,000,000) (3,000,000) (10,000,000)
(c) Double-diminishing-balance:
Asset’s remaining
depreciable ÷ (New) Estimated = (New) Annual
carrying amount useful life remaining depreciation
$36,000
Req. 2
DR CR
Amortization expense.......................... XX
Accumulated amortization.............. XX
Req. 1
(Millions)
Req. 2
Cost of
Appraised Percentage of Total Total Each
Machine Value Appraised Value Cost Asset
1 $ 27,000 $27,000 / $108,000 = 0.250 $100,000 0.250 = $25,000
2 45,000 45,000 / 108,000 = 0.417 100,000 0.417 = 41,700
3 36,000 36,000 / 108,000 = 0.333 100,000 0.333 = 33,300
Totals $108,000 1.000 $100,000
Immediate expenses:
(g) Income tax, (i) ordinary recurring repairs, (k) periodic
lubrication
A capital expenditure increases an asset’s capacity or
extends its useful life. An immediate expense maintains the
asset or restores it to working order.
Journal
ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
1 a. Land………………………………………… 200,00
. … 0
Cash………………………………………. 200,00
.. 0
c. Depreciation 6,840
Expense……………………...
Accumulated Depreciation
($744,000 – $60,000) / 25 6,840
3/12………..
2. BALANCE SHEET
Property, Plant, and Equipment:
Land ..................................................... $200,000
Building ............................................... $744,000
Less Accumulated depreciation ....... (6,840)
Building, net........................................ 737,160
3. INCOME STATEMENT
Expense:
Depreciation expense ........................ $ 6,840
Supplies expense
($10,000 – $2,000) .................................................... 8,000
BALANCE SHEET
Current assets:
Supplies ....................................................................... $ 2,000
Req. 2
Asset turnover for the year ended January 31, 2014:
Req. 3
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Year 11 Depreciation Expense…………………… 55,833
Accumulated Depreciation — Building 55,833
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2014 Depreciation for 6 months:
June 30 Depreciation Expense ........................1,800a
Accumulated Depreciation —
Fixtures ............................................ 1,800
Sale of fixtures:
30 Cash .....................................................5,000
Accumulated Depreciation —
Store Fixtures ($6,000 + $1,800) ........7,800
Loss on Sale of Fixtures ....................2,200b
Fixtures ............................................ 15,000
_____
a2013 depreciation: $15,000 2/5 = $6,000
Journal Entry:
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Part1(a)Purchase of patent:
Patents………………………………... 600,000
Cash………………………………… 600,000
_____
*Asset remaining carrying amount:
$600,000 – ($100,000 2) = $400,000
New estimated useful life remaining: 2 years
New annual depreciation: $400,000 ÷ 2 = $200,000
Req. 2
Req. 3
Req. 2
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Assets (Cash, Receivables,
Inventories, Property, Plant, and 25,000,000
Equipment) .....................................
Goodwill ......................................... 17,000,000
Liabilities ................................... 24,000,000
Cash ........................................... 18,000,000
Purchased My Space Ltd.
Req. 3
c. Renovation of stores
(or property) ................................................ (400,000)
Req. 2
Req. 3
Units-of-
Cost – Residual value Number of
production =
Useful life, in hours hours of use
depreciation
$100,000 + $2,000 –
$10,304 = $10,000 ?
50,000
$10,304 = $1.84 ?
$10,304
? =
$1.84
= 5,600 hours
Accumulated Depreciation
Accum. amort. of Beg. bal. 209.4
prop. and
X = 52.4 equip. sold X Depreciation exp. 38.1
End. bal. 195.1
_____
u = Understated
o = Overstated
Computations:
(a) Land: $320,000 / $400,000 $350,000 = $280,000
Office building: $80,000 / $400,000 $350,000 = $70,000
(n) Land improvements: $60,000 0.05 = $3,000
Warehouse: $60,000 0.85 = $51,000
Office building: $60,000 0.10 = $6,000
_____
*Some accountants would debit this cost to the Land account.
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2014
Dec. 31 Depreciation Expense — Land
Improvements ($103,800 / 20 4/12) ........ 1,730
Accumulated Depreciation —
Land Improvements ............................... 1,730
31 Depreciation Expense —
Furniture ($118,000 / 8 4/12)................... 4,917
Accumulated Depreciation —
Furniture ................................................... 4,917
_____
*$1,593 ($95,600 / 20 4/12) if $8,200 (“l” in Req. 1) is debited
to Land.
Journal
ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Equipment............................................................ 100,000
Cash.................................................................. 100,000
Req. 2
BALANCE SHEET
Property, Plant, and Equipment:
Land................................................................................... $ 150,000
Buildings........................................................................... 400,000
Less: Accumulated Depreciation ($87,500 + $17,500).. (105,000)
Equipment ($600,000 + $100,000)……………………..…. 700,000
Less: Accumulated Depreciation ($260,000 + $78,000) (338,000)
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2014
Jan. 2 Cash 70,000
Accumulated Amortization —
Motor Carrier Equipment (old) ...... 67,000
Motor Carrier Equipment (old) ........... 130,000
Gain on sale of Motor carrier
equipment........................................ 7,000
Jan. 2 Motor Carrier Equipment (new) 176,000
Cash 176,000
(Thousands)
Cost of property, plant, and equipment $68,406
Less: Accumulated depreciation ......... (26,909)
Carrying amount .................................. $41,497
Req. 2
Req. 3
Req. 4
Req. 1
Req. 2
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
(Millions)
Assets................................................ 4.1
Goodwill………………………….…… 1.2
Cash………………………………… 5.3
Req. 3
Req. 2
Ford
Income Statement – Integrated System
For Year 1
Req. 3
The patent value of $2,600,000 should be recorded as an
intangible asset as Ford has the exclusive right to use it in
production for 4 years. Since the expected useful life of the
patent is 4 years, it should be amortized on a straight-line basis
over 4 years.
Financial Accounting Fifth Canadian Edition Instructor’s Solutions Manual
526 Copyright © 2015 Pearson Canada Inc.
(30-40 min.) P 7-59A
Req. 1
Req. 2
Req. 2
Jan. 29, 2014 Jan. 30, 2013
Sales (net
revenue) $67,390 $65,357
÷ Average total ÷ ÷
assets $44,119 $44,320
=
= Asset turnover 1.53 = 1.47
Req. 3
Jan. 29, 2014 Jan. 30, 2013
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Dec. 31 Depreciation Expense — Land
Improvements ($86,000 / 10 9/12) ... 6,450*
Accumulated Depreciation —
Land Improvements ........................ 6,450
31 Depreciation Expense —
Equipment ($88,000 / 8 9/12) ......... 8,250
Accumulated Depreciation —
Equipment ........................................ 8,250
_____
*$6,049 ($80,650 / 10 9/12) if $5,350 (“l” in Req. 1) is
debited to Land.
Req. 3
Journal
ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Security Equipment ............................................ 80,000
Cash ................................................................. 80,000
Req. 2
BALANCE SHEET
Property, plant, and equipment:
Land .................................................................................. $200,000
Buildings .......................................................................... 310,000
Less: Accumulated Depreciation ($40,000 + $12,000).... (52,000)
Equipment ($620,000 + $80,000) ..................................... 700,000
Less: Accumulated Depreciation ($370,000 + $67,500) (437,500)
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
2014
Jan. 4 Communication Equipment (new) ..... 118,000
Cash 118,000
Cash 18,000
Accumulated Depreciation —
Communication Equipment (old) 85,000
Communication Equipment (old) .. 96,000
Gain on sale of Communication
equipment (old)........................... 7,000
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Dec. 31 Depreciation Expense —
Communication Equipment
($118,000 2/5) ................................... 47,200
Accumulated Depreciation —
Communication Equipment ..... 47,200
31 Depreciation Expense —
Communication Equipment
($60,000 2/5 2/12) 4,000
Depreciation Expense —
Televideo Equipment
($20,000 2/5 2/12)..................... 1,333
2/12)
Accumulated Depreciation —
Communication Equipment ......... 4,000
Accumulated Depreciation —
Televideo Equipment .................... 1,333
(Thousands)
Cost of premises and equipment ........ $5,941
Less: Accumulated depreciation ......... (3,810)
Carry amount of premises and equipment $2,131
Req. 2
Req. 3
Req. 1
Req. 2
Journal
DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Long-term assets ............................. 49,000
Goodwill ............................................ 5,500
Liabilities ...................................... 4,500
Cash .............................................. 50,000
DR CR
Copyright............................. 500,000
Cash.................................. 500,000
DR CR
Amortization expense....................... 300,000
Accumulated amortization........... 300,000
Req. 2
Req. 3
Req. 2
Jan. 31, 2014 Jan. 31, 2013
Sales $18,391 $17,178
÷ Average total
assets ÷ $13,362 ÷ $12,262
= Asset turnover = 1.38 = 1.40
Req. 4
The following contributed to the increase in ROA during the
most recent year.
Req. 1
Req. 2
INVESTMENT NEWSLETTER
Req. 2
Req. 1
Note 1-(j) to the financial statements reports that Telus uses the
straight-line depreciation method for their property, plant, and
equipment.
Req. 2
(Millions)
Proceeds on derecognition of property, plant, and $ 4
equipment
Note 15 indicates the cost of property, plant, and equipment
sold was $264 million.
Req. 3
(Millions)
2011 2010
Payment for property, plant, and
equipment …………………………. $1,847 $1,721
Req. 4
At year-end
2011 2010
Accumulated
Proportion of
Property, = depreciation = $ 20,347 $19,269
Property, $28,311* $27,100*
Plant, and
Plant, and
Equipment
Equipment at
used up
cost
= 71.9% = 71.1%
used up used up
*Assets not in service are not included
Req. 1
(Millions)
Depreciation expense………………………….…… $ 1,331
Accumulated depreciation………………………… 20,347
Amortization expense………………………….…… 479
Accumulated amortization………………………… 2,486
Req. 2
Req. 3
Telus does not amortize goodwill but will test goodwill for
impairment of value and will write-down the value of
goodwill that has been impaired.
Group Project