Account for depreciable assets (LO3)

Charlotte Motorcycle Repair Corporation purchased a machine on January 1, 2010, for $8,000 cash. The firm expects to use the machine for four years and thinks it will be worthless at the end of the four-year period. The company will depreciate the machine in equal annual amounts.

 

Requirements

1. Show the purchase of the machine and the first years depreciation in the accounting equation.

2. Show how the machine will be presented in the asset section of the balance sheet at December 31, 2010, and December 31, 2011, after appropriate adjustments

3. What amount of depreciation expense will be shown on the income statement for the year ended December 31, 2010? What amount will be shown for the year ended December 31, 2011?

4. Calculate the total depreciation expense for all four years of the assets life. What do you notice about the book value of the asset at the end of its useful life?

Sheet1

A

5

Amount

9

Amount

10

$0 $0

– 0 – 0

20

2010

Amount Amount

Amount Amount

Charlotte Motorcycle Repair Corporation

December 31

31

2010

Machine

– –

Type answer starting here

																																																																	Problem 3		–	5	9	A	Name
Section
B	C	D	E	F	G	H
Data Input Section:		Charlotte Motorcycle Repair Corporation
6
7	Cost of asset, January 1,	20	10							Amount
8	Estimated residual value
Estimated useful life
11	Output Section:	Depreciation Expense Per Year
12
13	Year ended	December	31			2010	2011	2012	2013
14	Depreciation expense	Formula 1			$0
15	Accumulated depreciation	Fomula 2			– 0
16
17	Helpful Hint:
18	Use the following functions to calculate depreciation
19	=SLN(cost,salvage,life)
21
22	Part 1.
23	A s s e t s =	Liabilities +	Stockholder’s Equity
24	Cash		Machine	Accum. Depr.
25	#1
26	#2	Title
27	Part 2.
28
29	Partial Balance Sheet
30
211
32	Formula 3	Formula 5
33	Less accumulated depreciation	Formula 4	Formula 6
34
35	Part 3.
36		Type answer starting here
37	Part 4.
38
39
40
End of Problem

&LReimers, Financial Accounting 3e

Sheet2

Sheet3