Question : 26) On February 1, 2011, Delta Distribution Company purchased a : 1253296

 

26) On February 1, 2011, Delta Distribution Company purchased a delivery truck that cost $30,000. The truck has an estimated useful life of 150,000 miles and an estimated salvage value of $3,000. The truck is driven 10,000; 34,000; and 28,000 miles for the years 2011, 2012, and 2013, respectively.

 

Required:

1. Calculate the depreciation expense per mile using the activity (units-of-production) method.

 

2. Use the activity method to complete the chart below:

 

Year

Miles

driven

Depreciation expense

for the year ended Dec. 31

Book value at Dec. 31

2011

10,000

$

$

2012

34,000

$

$

2013

28,000

$

$

 

3. Explain why long-term assets must be depreciated, rather than recorded as expenses in the period when the asset is purchased.

 

4. Explain why land is NOT depreciated when other assets, such as trucks, are depreciated.

27) On January 1, 2011, Gamma Company purchased equipment that cost $30,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $5,000.

Required:

1. Use the double-declining balance method to complete the chart below:

 

Year

Depreciation expense for the year

ended Dec. 31

Book value at Dec. 31

2011

$

$

2012

$

$

2013

$

$

 

2. Explain why long-term assets must be depreciated.

 

3. Explain why land is NOT depreciated when assets like equipment are.

 

28) Indicate which financial statement would report the items listed in the table below.

Use the following code:

 

IS = Income statement

SE = Statement of changes in shareholders’ equity

BS = Balance sheet

CF = Statement of cash flows

NONE = The item does not appear on any financial statement.

 

Depreciation expense

 

Cash paid to purchase equipment

 

Accumulated depreciation

 

Cash received from selling land

 

Equipment book value

 

Cash paid to purchase a building

 

Cash paid to purchase new computers

 

Cash received from selling 3-year machinery

 

An asset’s estimated useful life

 

An asset’s estimated residual value

 

Cash paid to purchase land

 

Amortization expense

 

 

29) Indicate which financial statement would report the items listed in the table below.

Use the following code:

 

IS = Income statement

SE = Statement of changes in shareholders’ equity

BS = Balance sheet

CF = Statement of cash flows

NONE = The item does not appear on any financial statement.

 

Accumulated depreciation

 

Cash paid to purchase machinery

 

Cash received from selling an old building

 

The current fair market value of land owned

 

Cash received from selling 10-year old machinery

 

Cash paid to purchase a building

 

The historical cost of equipment owned

 

Depreciation expense

 

The amount of revenue a specific asset generates

 

Cash paid to purchase office furniture

 

Cash paid to buy other businesses