Question

Smart Hardware purchased new shelving for its store on April 1, 2013. The shelving is expected to have a 20-year life and no residual value. Smart Hardware adopts the cost model as its accounting policy in subsequently measuring its property, plant, and equipment. The following expenditures were associated with the purchase:

  

Cost of the shelving	$	120,000
Freight charges		5,200
Sales taxes		7,800
Installation of shelving		27,000
Cost to repair shelf damaged during installation		4,000

    

a-1.	Compute depreciation expense for the years 2013 through 2016, using the straight-line method with fractional years rounded to the nearest whole month. (Omit the "$" sign in your response.)

  

Year	Depreciation expense
2013		$
2014
2015
2016

   

a-2.	Compute depreciation expense for the years 2013 through 2016, using the 200 percent declining-balance, using the half-year convention. (Omit the "$" sign in your response.)

  

Year	Depreciation expense
2013		$
2014
2015
2016

  

a-3.	Compute depreciation expense for the years 2013 through 2016, using the 150 percent declining-balance, using the half-year convention. (Omit the "$" sign in your response.)

  

Year	Depreciation expense
2013		$
2014
2015
2016

  

c-1.	Which of the depreciation methods applied in part a resulted in the lowest reported book value at the end of 2016?
	(Click to select)

  

c-2.	Is book value an estimate of an asset’s fair value?
	(Click to select)Yes or No

d-1.	Assume that Smart Hardware sold the old shelving that was being replaced. The old shelving had originally cost $90,000. Its book value at the time of the sale was $4000. Record the sale of the old shelving was sold for $12,000 cash. (Omit the "$" sign in your response.)

General Journal	Debit	Credit
(Click to select)
(Click to select)
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d-2.	Assume that Smart Hardware sold the old shelving that was being replaced. The old shelving had originally cost $90,000. Its book value at the time of the sale was $4000. Record the sale of the old shelving was sold for $2,000 cash. (Omit the "$" sign in your response.)

  

General Journal	Debit	Credit
(Click to select)
(Click to select)
(Click to select)
(Click to select)

Answer 1

	Cost of shelving	$120,000
	Freight charges	$5,200
	Sales taxes	$7,800
	Installation of shelving	$27,000
	Cost to repair	$4,000
	The total cost to be depreciated	$164,000
a-1.	Straight-line method
	Year	Depreciation Expense
	2013	$6,150
	2014	$8,200
	2015	$8,200
	2016	$8,200
	Depreciation per year ($164,000 - $0)/20 Year = $8,200
a-2.	200 percent declining-balance
	Year	Depreciation Expense
	2013	$12,300
	2014	$15,170
	2015	$13,653
	2016	$12,288
a-3.	150 percent declining-balance
	Year	Depreciation Expense
	2013	$9,225
	2014	$11,608
	2015	$10,738
	2016	$9,932
c-1.	200 percent declining-balance
c-2.	No.
d-1.	General Journal	Debit	Credit
	Cash	$12,000
	Accumulated Depreciation	$86,000
	Furniture & Fixture		$90,000
	Gain on Sale of Assets		$8,000
d-1.	General Journal	Debit	Credit
	Cash	$2,000
	Accumulated Depreciation	$86,000
	Loss on Sale of Assets	$2,000
	Furniture & Fixture		$90,000