School of International Business Intermediate Accounting 2
Spring 2022-2023 Tutorial 2
Solution:
𝐶𝑜𝑠𝑡−𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑉𝑎𝑙𝑢𝑒 279,000−15,000
a) SLM = = = 26,400
𝑈𝑠𝑒𝑓𝑢𝑙 𝐿𝑖𝑓𝑒 10
(𝐶𝑜𝑠𝑡−𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑉𝑎𝑙𝑢𝑒)×𝑈𝑛𝑖𝑡𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑑 (279,000−15,000)×25,500
b) Units of Output = = = 28,050
𝑇𝑜𝑡𝑎𝑙 𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 240,000
(𝐶𝑜𝑠𝑡−𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑉𝑎𝑙𝑢𝑒)×𝐻𝑜𝑢𝑟𝑠 𝑜𝑓 𝑡ℎ𝑒 𝑦𝑒𝑎𝑟 (279,000−15,000)×2,650
c) Working Hours = = = 27,984
𝑇𝑜𝑡𝑎𝑙 𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝐻𝑜𝑢𝑟𝑠 25,000
𝑛(𝑛+1) 10(10+1)
d) Sum-of-years = = = 55
2 2
Year Dep. Base Remaining Dep. Partial Dep.
(Cost – Residual Value) Life Fraction Year Expense
1 264,000 10 10/55 8/12 32,000
2 264,000 9 9.333333/55 44,800
10 4 9 8
Or, 2016 = 55 × 264,000 × + 55 × 264,000 × = 𝟒𝟒, 𝟖𝟎𝟎
12 12
1 1
e) Double Declining Rate = 𝑢𝑠𝑒𝑓𝑢𝑙 𝑙𝑖𝑓𝑒 × 2 = 10 × 2 = 20%
Year Carrying Amount Dep. Rate Partial Year Dep. Expense
1 279,000 20% 8/12 37,200
2 241,800 20% 48,360
School of International Business Intermediate Accounting 2
Spring 2022-2023 Tutorial 2
Solution:
304,000−16,000
a) 2015 Straight-line= = $36,000/year
8
3 months—Depreciation ($36,000 X 3/12) = 9,000
(304,000−16,000)×1,000
b) 2015 Output = = 7,200
40,000
(304,000−16,000)×525
c) 2015 Working Hours = = 7,560
20,000
𝑛(𝑛+1) 8(8+1)
d) Sum of years = = = 36
2 2
Year Dep. Base Remaining Dep. Partial Year Dep.
(Cost – Residual Value) Life Fraction Expense
1 288,000 8 8/36 3/12 16,000
2 288,000 7 7.75/36 62,000
3 288,000 6 6.75/36 54,000
Or 2015 = 288,000 × 8/36 × 3/12 = 16,000
2016 =288,000 × 8/36 × 9/12 + 288,000 × 7/36 × 3/12 = 62,000
2017 = 288,000 × 7/36 × 9/12 + 288,000 × 6/36 × 3/12 = 54,000
1 1
e) Double Declining Rate = 𝑢𝑠𝑒𝑓𝑢𝑙 𝑙𝑖𝑓𝑒 × 2 = 8 × 2 = 25%
Year Carrying Amount Dep. Rate Partial Year Dep. Expense
1 304,000 25% 3/12 19,000
2 285,000 25% 71,250
School of International Business Intermediate Accounting 2
Spring 2022-2023 Tutorial 2
Solution:
a) 31/12/2015 Loss on Impairment 1,000,000
Accumulated Depreciation- Equipment 1,000,000*
*Carrying Amount = 9,000,000 – 1,000,000 = 8,000,000
Recoverable Amount = (7,000,000)
Loss on Impairment = 1,000,000
b) 31/12/2016 Depreciation Expense 1,750,000
Accumulated Depreciation 1,750,000**
**New Carrying Amount = 7,000,000
Useful Life = 4
Depreciation Expense = 7,000,000 ÷ 4 = 1,750,000
c) Accumulated Depreciation 750,000
Recovery of Impairment Loss 750,000
School of International Business Intermediate Accounting 2
Spring 2022-2023 Tutorial 2
Solution:
a) 31/12/2015 Loss on Impairment 1,900,000
Accumulated Depreciation- Equipment 1,900,000*
*Carrying Amount = 10,000,000 – 2,500,000** =7,500,000
**Acc. Dep = 10,000,000 / 8 × 2 = 2,500,000
Recoverable Amount = (5,600,000)
Loss on Impairment = 1,900,000
b) 31/12/2016 Depreciation Expense 1,400,000
Accumulated Depreciation 1,400,000**
**New Carrying Amount = 5,600,000
Useful Life = 4
Depreciation Expense = 5,600,000 ÷ 4 = 1,400,000
Accumulated Depreciation 700,000*
Recovery of Impairment Loss 700,000*
* Carrying Amount = 5,600,000 – 1,400,000 = 4,200,000
Recoverable Amount = 4,900,000
c) 31/12/2015 Loss on Impairment 1,900,000
Accumulated Depreciation- Equipment 1,900,000
31/12/2016 Loss on Impairment 700,000
Accumulated Depreciation- Equipment 700,000*
*(5,600,000 – 4,900,000)
