The following data relate to the Plant Asset account of Planter Co., at December
ID: 2388982 • Letter: T
Question
The following data relate to the Plant Asset account of Planter Co., at December 31, 1999.
Plant Asset
A
B
C
D
Original cost
?
$240,000
$25,000,000
$60,000
Year purchased
Jan 1, 1992
Jan 1. 1998
?
Jan 1, 1994
Useful life
20 years
5
30 years
10 years
Salvage Value
$10,000
?
$2,000,000
$4,000
Depreciation Method
Straight Line
Sum-of-Years
Straight line
150% declining balance
Accumulated Depr
?
$126,000*
?
?
Book value
$196,000
?
$20,783,333
?
*For Asset B the depreciation was $70,000 in 1998 and $56,000 in 1999.
a) On December 31, 1999, after all adjusting journal entries are complete, Asset A has a book value of $196,000 as given above. Determine the cost of the machine.
b) Determine the salvage value of Asset B and provide the appropriate depreciation journal entry for fiscal year 2000?
c) On the firm’s December 31, 1999 financial statements, the book value of Asset C is $20,783,333 million as given above. Estimate the date (month and year) in which Asset C was purchased?
d) For 1999, Planter decides to change the depreciation method of Asset D to the straight line method (note that the FASB does not consider a change in depreciation method to be a change in Accounting Principle).
(i) Prepare the appropriate journal entry to account for this change in accounting method.
(ii) In addition to the change to the straight line method now assume that Planter determines that the estimated life has been extended to 8 years (from the beginning of the current year) with a salvage of $5,000 at the end of that time. Prepare the appropriate journal entry to account for this change in estimate.
e) Complete the missing information in the chart for the Assets A through D.
Plant Asset
A
B
C
D
Original cost
?
$240,000
$25,000,000
$60,000
Year purchased
Jan 1, 1992
Jan 1. 1998
?
Jan 1, 1994
Useful life
20 years
5
30 years
10 years
Salvage Value
$10,000
?
$2,000,000
$4,000
Depreciation Method
Straight Line
Sum-of-Years
Straight line
150% declining balance
Accumulated Depr
?
$126,000*
?
?
Book value
$196,000
?
$20,783,333
?
Explanation / Answer
a) we need to solve the equation x- 8(x-10,000)/20= 196,000 If we do we get x=320,000 which is the cost of the machine. b)we need to solve the equation 240,000- 9(240,000-x)/15 = 126,000 If we do we get x=50,000 which is the salvage value. c) The asset is being depreciated (25,000,000-2,000,000)/30 so it is being depreciated 766,667 per year. It has been depreciated 25,000,000-20,783,333= 4,216,667 So 4,216,667/766,667=5.5 years so it was purchased July 1, 1994. Post the others as a separate question and I'll answer them.
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