- •108. On July 1, 2006, Jekel & Hyde Inc. Purchased land and incurred other costs relative to the construction of a new warehouse. A summary of economic activities is listed below:
- •Required:
- •Indicate the accounts that would be affected by the above transactions and the resulting balance in each account. Apply the interest on the construction loan to the cost of the building only.
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •In its 2004 annual report to shareholders, Boston Beer Co. Disclosed the following footnote:
- •E. Property, Plant and Equipment
- •128. Use a t- account to show the balances and changes during 2004 in Boston Beer's: Property, Plant and Equipment account and its Accumulated depreciation—Property, Plant & equipment account.
- •Required:
- •130. Use a t- account to show the balances and changes during 2004 in Plank Breweries:
- •Note 4 Property, Plant and Equipment
- •100. A summary of Klugman Company's December 31, 2006, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group:
- •101. A summary of London Fashion's December 31, 2006, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group:
- •114. Is there any evidence in Winchester's disclosures above that are consistent with earnings management?
- •Required:
- •121. Is there any evidence in hp's disclosures above that are consistent with earnings management?
- •100. Required:
- •101. Required:
- •104. Required:
- •105. Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •Required:
- •127. In its 2004 annual report to shareholders, Martin Marietta Materials, Inc. Included the following in its financial statement footnotes:
- •Note e: property, plant and equipment, net
- •In another footnote, the company reported:
Required:
-
Compute the depletion rate and the units-of-production depreciation rate.
-
Compute depletion and depreciation for 2006 and 2007.
Answer:
|
(1) |
Mineral rights |
$ 200,000 |
|
|
Mine shaft |
2,400,000 |
|
|
Depletion base |
2,600,000 |
|
|
Recoverable ore (tons) |
÷2,000,000 |
|
|
Depletion rate per ton |
$1.30 |
|
|
|
|
|
|
Mining equipment |
$1,800,000 |
|
|
Less: residual value |
150,000 |
|
|
Depreciable base |
1,650,000 |
|
|
Recoverable ore (tons) |
÷2,000,000 |
|
|
Depreciation rate per ton |
$0.825 |
|
|
|
|
|
(2) |
Depletion: |
|
|
|
2006: 300,000 x $1.30 |
$390,000 |
|
|
2007: 700,000 x $1.30 |
$910,000 |
|
|
|
|
|
|
Depreciation: |
|
|
|
2006: 300,000 x $0.825 |
$247,500 |
|
|
2007: 700,000 x $0.825 |
$577,500 |
Learning Objective: 3 Level of Learning: 3
114. On February 20, 2006, Genoa Mining Company incurred costs of $3,600,000 to acquire and prepare to extract an estimated 4,000,000 tons of mineral deposits. 450,000 tons of ore were mined in 2006. At the beginning of 2007, Genoa geologists estimated that 3,900,000 tons of ore still remained. 700,000 tons of ore were mined in 2007.
Required:
Compute depletion expense for 2006 and 2007.
Answer:
|
2006: |
|
|
|
|
Cost |
$3,600,000 |
|
|
Recoverable ore (tons) |
÷4,000,000 |
|
|
Depletion rate |
$0.90 |
|
|
Ore mined in 2006 |
450,000 |
|
|
Depletion - 2006 |
$405,000 |
|
2007: |
|
|
|
|
Cost |
$3,600,000 |
|
|
Less: 2006 depletion |
405,000 |
|
|
Carrying value, Jan. 1, 2007 |
3,195,000 |
|
|
Estimated tons recoverable |
÷3,900,000 |
|
|
Revised depletion rate |
$0.81923 |
|
|
Mined in 2007 (tons) |
700,000 |
|
|
Depletion - 2007 |
$573,461 |
Learning Objective: 3 Level of Learning: 3
115. Weaver Textiles Inc. has used the straight-line method for depreciation of its equipment since it started business in 2002. At the beginning of 2006, the company decided to change to the double-declining-balance (DDB) method. Depreciation expense as reported and as it would have been reported if the company had always used DDB is listed below:
|
Year |
Straight-Line |
DDB |
|
2002 |
$22,000 |
$45,000 |
|
2003 |
25,000 |
40,000 |
|
2004 |
28,000 |
38,000 |
|
2005 |
28,000 |
32,000 |