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# E10-7 Brainiac Company purchased a delivery truck for \$30,000

### Customer Question

E10-7

Brainiac Company purchased a delivery truck for \$30,000 on January 1, 2008. The truck has an expected salvage value of \$2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2008 and 12,000 in 2009.

Compute depreciation expense for 2008 and 2009 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining balance method. (For part (2), round cost per mile to 2 decimal places. Round final answers to 0 decimal places, e.g. 125.)

2008 2009
Straight-line \$ \$
Units-of-Activity \$ \$
Double-declining Balance \$ \$

Assume that Brainiac uses the straight-line method. (1) Prepare the journal entry to record 2008 depreciation. (2) Show how the truck would be reported in the December 31, 2008, balance sheet. (Enter all amounts as positive amounts and subtract where necessary.)

Account / Description Debit Credit
\$
\$

\$
Less:

\$

E10-8

Jerry Grant, the new controller of Blackburn Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2008. His findings are as follows.

Accumulated Useful Life
Type Date Depreciation

in Years

Salvage Value

of Asset

Acquired

Cost

1/1/08

Old

Proposed

Old

Proposed
Building 1/1/02 \$800,000 \$114,000 40 50 \$40,000 \$37,000
Warehouse 1/1/03 100,000 19,000 25 20 5,000 3,600

All assets are depreciated by the straight-line method. Blackburn Company uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Jerry's proposed changes.

Compute the revised annual depreciation on each asset in 2008.

Building \$
Warehouse \$

Prepare the entry (or entries) to record depreciation on the building in 2008.

Date Account / Description Debit Credit
Dec. 31 \$
\$

E10-10

Beka Company owns equipment that cost \$50,000 when purchased on January 1, 2005. It has been depreciated using the straight-line method based on estimated salvage value of \$5,000 and an estimated useful life of 5 years.

Instructions

Prepare Beka Company's journal entries to record the sale of the equipment in these four independent situations.

Sold for \$28,000 on January 1, 2008. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Account / Description Debit Credit
\$
\$
\$
\$

Sold for \$28,000 on May 1, 2008. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Account / Description Debit Credit
\$
\$
\$
\$
\$
\$

Sold for \$11,000 on January 1, 2008. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Account / Description Debit Credit
\$
\$
\$
\$

Sold for \$11,000 on October 1, 2008. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Account / Description Debit Credit
\$
\$
\$
\$
\$
\$

E10-13
Herzogg Company, organized in 2008, has the following transactions related to intangible assets.

1/2/08 Purchased patent (7-year life) \$560,000
4/1/08 Goodwill purchased (indefinite life) 360,000
7/1/08 10-year franchise; expiration date 7/1/2018 440,000
9/1/08 Research and development costs 185,000

Instructions

Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the adjusting entries as of December 31, 2008, recording any necessary amortization and reflecting all balances accurately as of that date. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Date Account / Description Debit Credit
1/2/08 \$
\$
4/1/08 \$
\$
7/1/08 \$
\$
9/1/08 \$
\$
12/31/08 \$
\$
\$
\$

P10-4A
At the beginning of 2006, Lehman Company acquired equipment costing \$90,000. It was estimated that this equipment would have a useful life of 6 years and a residual value of \$9,000 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type of equipment. Depreciation is to be recorded at the end of each year.
During 2008 (the third year of the equipment's life), the company's engineers reconsidered their expectations, and estimated that the equipment's useful life would probably be 7 years (in total) instead of 6 years. The estimated residual value was not changed at that time. However, during 2011 the estimated residual value was reduced to \$5,000.

Instructions

Indicate how much depreciation expense should be recorded each year for this equipment, by completing the following table.

Year

Depreciation Expense

Accumulated Depreciation
2006 \$ \$
2007 \$ \$
2008
Submitted: 6 years ago.
Category: Homework
Expert:  Manal Elkhoshkhany replied 6 years ago.