Question

In: Accounting

Record property, plant, and equipment transactions P6-53B Schmaltz Cable Company’s balance sheet reports the following assets...

Record property, plant, and equipment transactions

  1. P6-53B Schmaltz Cable Company’s balance sheet reports the following assets under Property, Plant, and Equipment: Land, Buildings, Office Furniture, Communication Equipment, and Televideo Equipment. The company has a separate accumulated depreciation account for each of these assets except land. Assume that Schmaltz Cable completed the following transactions:

    2017
    Jan. 4 Sold communication equipment with accumulated depreciation of $85,000 (cost of $96,000) for $18,000. Purchased new equipment for $118,000.
    June 30 Sold a building that had cost $495,000 and had accumulated depreciation of $255,000 through December 31 of the preceding year. Depreciation is computed on a straight-line basis. The building has a 40-year useful life and a residual value of $95,000. The company received $50,000 cash and a $250,000 note receivable.
    Nov. 4 Purchased used communication and televideo equipment from Rogers Cable Company. Total cost was $80,000 paid in cash. An independent appraisal valued the communication equipment at $75,000 and the televideo equipment at $25,000.
    Dec. 31 Depreciation is recorded as follows:
     Equipment is depreciated by the double-diminishing-balance method over a five-year life with zero residual value. Depreciation is recorded separately on the equipment purchased on January 4 and on November 4.

Requirement

  1. Record the transactions in Schmaltz Cable’s journal.

  2. How does management choose which depreciation method to use?

Solutions

Expert Solution

There are many method by which an Asset can be depreciated over its useful life. The Law does not recommend any particular method, it is wholly management choice to choose whatever method they like.

Only difference it create is Depreciation amount in earlier year and following year.

Under SLM the depreciation amount is same in all years.But on other hand under double-diminishing-balance method the depreciation amount is higher in earlier year and less in following years

Do reach us in comment section for any clarification.


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