Question

1. Blue Spruce Corp. purchased a new machine on October 1, 2019, at a cost of $134,000. The company estimated that the machine will have a salvage value of $20,000. The machine is expected to be used for 10,000 working hours during its 5-year life.

Compute the depreciation expense under straight-line method for 2019. (Round answer to 0 decimal places, e.g. 2,125.)
2019 Depreciation expense:

2. Yello Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2019, at a cost of $227,125. Over its 4-year useful life, the bus is expected to be driven 132,500 miles. Salvage value is expected to be $8,500.

Compute the depreciable cost per unit. (Round answer to 2 decimal places, e.g. 0.50.)

Depreciation cost per unit:        per mile

3. In recent years, Sheffield Transportation purchased three used buses. Because of frequent turnover in the accounting department, a different accountant selected the depreciation method for each bus, and various methods were selected. Information concerning the buses is shown as follows.

For the declining-balance method, the company uses the double-declining rate. For the units-of-activity method, total miles are expected to be 124,000. Actual miles of use in the first 3 years were 2018, 26,000; 2019, 31,500; and 2020, 29,500.

For Bus #3, calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.)

Depreciation expense:    per mile

USE CHART BELOW THIS

Bus		Acquired		Cost		Salvage Value		Useful Life in Years		Depreciation Method
1		1/1/17		$ 99,000		$ 7,500		4		Straight-line
2		1/1/17		130,000		10,500		5		Declining-balance
3		1/1/18		89,340		7,500		4		Units-of-activity

4. On January 1, 2019, Pina Colada Company purchased the following two machines for use in its production process.

Machine A:		The cash price of this machine was $46,000. Related expenditures included: sales tax $3,250, shipping costs $200, insurance during shipping $110, installation and testing costs $90, and $100 of oil and lubricants to be used with the machinery during its first year of operations. Pina Colada estimates that the useful life of the machine is 5 years with a $4,200 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used.
Machine B:		The recorded cost of this machine was $180,000. Pina Colada estimates that the useful life of the machine is 4 years with a $9,850 salvage value remaining at the end of that time period.

Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. 2,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation debit credit 1 2

5. At December 31, 2019, Sheffield Corp. reported the following as plant assets.

Land				$ 3,770,000
Buildings		$27,870,000
Less: Accumulated depreciation—buildings		11,900,000		15,970,000
Equipment		48,370,000
Less: Accumulated depreciation—equipment		4,850,000		43,520,000
Total plant assets				$63,260,000

During 2020, the following selected cash transactions occurred.

April 1		Purchased land for $2,120,000.
May 1		Sold equipment that cost $930,000 when purchased on January 1, 2016. The equipment was sold for $558,000.
June 1		Sold land purchased on June 1, 2010 for $1,490,000. The land cost $394,000.
July 1		Purchased equipment for $2,480,000.
Dec. 31		Retired equipment that cost $508,000 when purchased on December 31, 2010. The company received no proceeds related to salvage.

Journalize the above transactions. The company uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 50-year life and no salvage value. The equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

1	Straight Line Depreciation = (Cost-Salvage Value)/No of years
	Depreciation for 2019		(134000-20000)/5*3/12			5700
	2019 Depreciation Expense			$5,700
2	Depreciation cost per mile = (227125-8500)/132500					1.65
3	Depreciation Expense per mile = (89340-7500)/124000					0.66
4	Cost Price of Machine A
	Cash Price		$46,000
	Sales Tax		$3,250
	Shipping costs		$200
	Insurance during shipping		$110
	Installation costs and testing costs		$90
	Total Cost		$49,650
	Account Titles and Explanation		Debit	Credit
1	Equipment		$49,650
	Cash			$49,650
2	Depreciation Expense		$9,090
	Accumulated Depreciation - Equipment			$9,090
	Depreciation = (49650-4200)/5			9090
5
Date	Account Titles and Explanation		Debit	Credit
1-Apr	Land		$2,120,000
	Cash			$2,120,000
1-May	Cash		$558,000
	Accumulated Depreciation - Equipment		$403,000
	To Gain on Sale of Equipment			$31,000
	To Equipment			$930,000
	Depreciation on Equipment (930000/10)			93000
	Depreciation from 2016-2019 = 93000*4			372000
	Depreciation in 2020 = 93000*4/12			31000
	Total Accumulated Depreciation			403000
1-Jun	Cash		$1,490,000
	To Land			$394,000
	To Gain on Sale of Land			$1,096,000
1-Jul	Equipment		$2,480,000
	Cash			$2,480,000
31-Dec	Accumulated Depreciation - Equipment		$508,000
	To Equipment			$508,000
	Depreciation on Equipment (508000/10)			50800
	Depreciation from 2011-2020 = 50800*10			508000