SM Chapter 09

www.downloadslide.
net
Kimmel, Weygandt, Kieso, Trenholm, Irvine Financial Accounting, Sixth Canadian Edition
CHAPTER 9
Reporting and Analyzing Long-Lived Assets
ASSIGNMENT CLASSIFICATION TABLE

Brief A B
Study Objectives Questions Exercises Exercises Problems Problems BYP
1. Determine the cost 1, 2, 3, 4 1, 2, 3 1, 2 1A, 2A, 3A 1B, 2B, 3B 4, 6, 7

of property, plant,
and equipment.
2. Explain and 5, 6, 7, 8, 4, 5, 6, 7, 2, 3, 4, 5, 6, 2A, 3A, 4A, 2B, 3B, 4B 1, 3, 4,

calculate 9, 13 8, 9 8 5A, 6A, 7A, 5B, 6B, 5, 7
depreciation. 8A 7B, 8B
3. Account for the 10, 11, 12 10, 11 5, 6, 7 6A, 7A, 8A 6B, 7B, 8B 7
derecognition of
property, plant, and
equipment.
4. Identify the basic 13, 14, 12, 13 8, 9, 10 9A, 10A, 9B, 10B, 1, 4
accounting issues 15, 16, 17 11A 11B
for intangible assets
and goodwill.
5. Illustrate how long- 18, 19, 20 12, 14, 15 10, 11 8A, 10A, 8B, 10B 1
lived assets are
reported in the
financial statements.
6. Describe the 21, 22, 23 16, 17 12, 13 11A, 12A, 11B, 12B 2, 3, 4,
methods for 5
evaluating the use of
assets.
Solutions Manual 9-1 Chapter 9

Copyright © 2014 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.
www.downloadslide.net
ASSIGNMENT CHARACTERISTICS TABLE
Problem Difficulty Time

Number Description Level Allotted (min.)
1A Classify expenditures. Moderate 15-20
2A Determine cost; record property transactions. Simple 20-30
3A Determine cost; calculate depreciation under different Moderate 30-40

methods.
4A Calculate and compare depreciation under different Moderate 40-50

methods.
5A Calculate depreciation; discuss revision of estimate. Moderate 15-20
6A Record acquisition, depreciation, and disposal of Simple 15-20

equipment.
7A Record and determine effect of depreciation method Moderate 35-45

over life of asset.
8A Record property, plant and equipment transactions; Moderate 10-15

prepare partial statement of financial position.
9A Identify intangible assets and goodwill. Moderate 20-30
10A Record intangible asset transactions; prepare partial Moderate 30-40

statement of financial position.
11A Calculate and evaluate ratios. Moderate 30-40
12A Calculate and evaluate ratios. Moderate 30-40
1B Classify expenditures. Moderate 15-20
2B Determine cost; record property transactions. Simple 20-30
3B Determine cost; calculate depreciation under different Moderate 35-45

methods.
4B Calculate and compare depreciation under different Moderate 40-50

methods.

ASSIGNMENT CHARACTERISTICS TABLE (Continued)
Problem Difficulty Time

Number Description Level Allotted (min.)
5B Calculate depreciation; discuss revision of estimate. Moderate 15-20
6B Record acquisition, depreciation, and disposal of Simple 15-20

equipment.
7B Record and determine effect of depreciation method Moderate 35-45

over life of asset.
8B Record property, plant and equipment transactions; Moderate 10-15

prepare partial statement of financial position.
9B Identify intangible assets and goodwill. Moderate 20-30
10B Record intangible asset transactions; prepare partial Moderate 30-40

statement of financial position.
11B Calculate and evaluate ratios. Moderate 30-40
12B Calculate and evaluate ratios. Moderate 30-40

ANSWERS TO QUESTIONS
1. (a) The cost principle requires that property, plant, and equipment be recorded at cost,
which consists of the purchase price, less any discounts or rebates and any other
expenditures necessary to acquire the asset and make it ready for its intended use.
(b) An asset retirement cost is an estimate of the cost of an obligation to dismantle,

remove or restore a long-lived asset when it is retired. These costs are included in
the cost of property, plant, and equipment and depreciated over the life of the
asset.
2. Two examples of operating expenditures include routine maintenance and painting of

equipment. Operating expenditures are expensed in the period they are incurred. They
help maintain an asset but do not add additional value, useful life, or economic benefits.
Two examples of capital expenditures include the shipping cost of equipment to its
location of use and testing it to ensure it is ready for its intended use. Capital
expenditures are included as part of the cost of the new equipment. They are incurred
to make an asset ready for use (or to enhance its productivity or extend its life).
3. Land improvements are structural additions made to the land such as parking lots and
fences. Clearing and grading the land are not land improvements but are part of the
land cost as they are required to get the land ready for its intended use. They would
therefore be capitalized (recorded) in the Land account.
4. An operating lease allows the lessee to account for the leasing transaction as a rental
and so the lease payments are recorded to Rent Expense, an income statement
account. As a result, neither the asset nor the liability related to the asset is recorded
on the company’s books.
For a finance lease, both the asset and the liability related to the leased asset are
recorded on the company’s books even though the asset is not legally owned by the
party leasing the asset. The asset account involved would be Assets under Finance
Leases and the related liability account would be Finance Lease Liability.

Answers to Questions (Continued)

5.
(1) (2) (3) (4)
Depreciation Accumulated Carrying
Expense Profit Depreciation Amount
(a) Early years
Straight-line Same each year Constant charge Increases at a Declines at a

(depreciation constant constant amount
expense) to amount each each year
profit year
Units-of- Varies with Impact on profit Increases at a Declines at a

production number of units will vary with the variable amount variable amount
produced number of units based on
produced number of units
produced
Diminishing- Decreases each Increasing profit Increases at a Declines at a

balance year each year diminishing higher amount in
because amount each the early years
depreciation year
expense is
lower each year
(b) Total life
Straight-line, All three result All three result All three result All three result in
units-of- in the same total in the same total in the same the same ending
production, depreciation impact on profit total carrying amount
diminishing- expense accumulated
balance depreciation
6. If the residual value was deducted for the diminishing balance method, the carrying
value would never reach the residual value. Applying a fixed percentage rate to a
diminishing balance will always result in an undepreciated balance because a portion of
the depreciable amount will always remain at the end of the period. Residual value is
considered in the diminishing-balance method by ensuring that the asset is never
depreciated below its residual value. In this way we always make sure that the
undepreciated balance (carrying amount) is adjusted to equal residual value at the end
of its useful life. Residual value is subtracted from the cost when using the other
methods because the resulting depreciable cost is needed to determine the annual
depreciation expense.


7. The straight-line and diminishing-balance methods use annual depreciation rates in
their depreciation calculations. Therefore, the result must be adjusted for any period
less than one year. The units-of-production method does not need to be adjusted for
partial periods as this method multiplies the depreciable amount per unit by the actual
units produced in the period. This reflects how much the asset was used during the
period.
For example, if an asset was purchased July 1 and produced 10,000 units for the
period July through December, it can only produce a result for that six month period
(the company could not have produced units before it purchased the asset) and
therefore does not need to be adjusted for the half year ownership period.
8. (a) A company should choose the depreciation method it believes will best reflect the
pattern over which the asset’s future economic benefits are expected to be
consumed. The depreciation method must be revised if the expected pattern of
consumption of the future economic benefits has changed.
(b) Private companies using ASPE would not be allowed to use the revaluation model
and therefore must use the cost model. Publicly traded companies, which must
follow IFRS, can choose to use the cost model or the revaluation model. Factors to
consider when choosing the revaluation model over the cost model are whether fair
values are more relevant than cost (such as in the real estate industry), whether
reliable measures of fair value can be obtained, and whether the benefits from the
revaluation model exceed the additional costs involved in determining the value of
the assets each year.
9. (a) Companies need to calculate an impairment loss when an asset becomes obsolete
or when a competitive market causes a decline in sales of products produced by
that asset. The impairment loss is the amount by which the carrying amount of the
asset exceeds its recoverable amount. The loss is recorded with debit to
Impairment Loss and a credit to the Accumulated Depreciation account of the asset
or the asset itself if a contra account is not used.
(b) Some companies attempt to record asset impairments in fiscal years where the
company is experiencing poor results and the additional charge for the impairment
will not be noticed or will be received in a better light by the financial statement
users. Once the carrying amounts of the assets are reduced from the recording of
the impairment loss, subsequent depreciation is correspondingly reduced. Since
management’s judgement is involved in arriving at the amount of impairment loss,
the timing of the recording of the loss may be the result of management’s objective
to manipulate current and future years’ financial results. This approach becomes
problematic to the financial statement users who are looking to compare results
over several fiscal years to properly identify and assess financial trends.


10. Depreciation must be updated for the period that has elapsed since depreciation was
last recorded to the date of the sale because the depreciation expense must properly
reflect the total period over which the asset’s economic benefits are used. Updating
depreciation also aids in determining the correct amount of the gain or loss on
disposition.
11. In a sale of property, plant, and equipment, the carrying amount of the asset is
compared to the proceeds received from the sale. If the proceeds of the sale exceed
the carrying amount of the asset, a gain on disposal occurs. If the proceeds of the sale
are less than the carrying amount of the asset sold, a loss on disposal occurs. The
calculation is the same for an asset that is retired if proceeds, such as a residual value,
are received. Often there are no proceeds received when an asset is retired. If no
proceeds are received, a gain will never occur.
12. The machine and related accumulated depreciation should continue to be reported on
the statement of financial position without further depreciation or adjustment until the
asset is retired. Reporting the asset and related accumulated depreciation on the
statement of financial position informs the reader of the financial statements that the
company is still using the asset. Once an asset is fully depreciated, even if it is still
being used, no additional depreciation should be taken on this asset. In no situation can
the accumulated depreciation on the asset exceed the cost of the asset.
13. Tangible and intangible assets have similar characteristics, in that they are purchased
for use in the operations and not for resale, have usefulness beyond one fiscal year
and are depreciated or amortized, with the exception of land and indefinite life
intangible assets. Tangible and intangible assets are also similar in that their cost
includes all of the necessary outlays that are made to get the asset ready for its
intended use. They differ in their physical substance in that intangible assets have no
physical substance.
14. Since finite intangible assets have limited usefulness to the business, each period of
benefit should be charged with the allocation of the amortizable cost of the intangible
asset used to generate revenue. Indefinite life intangible assets cannot have a
systematic allocation of their amortizable cost allocated against revenues as the period
of benefit is indeterminable. Rather, these assets are tested for impairment more
frequently to ensure that their recoverable amount continues to exceed their carrying
amount.


15. (a) The cost of intangible assets with finite lives should be amortized over the shorter
of that asset's useful life (the period of time when operations are benefited by use
of the asset) or its legal life. Extending the amortization period beyond the useful
life would result in a misallocation of the cost of the intangible asset to accounting
periods beyond those when the asset was in use and contributed to producing
revenue.
(b) If the useful life is shorter than legal life, amortizing the asset over its legal life
would be inappropriate because the amortization each year would be too low and
the asset would have a carrying amount shown on the statement of financial
position after its useful life had passed.
16. The legal fees should be added to the cost of the patent and amortized over the
patent’s remaining useful life as they prove the patent’s validity and add to, or ensure
the continuation of, the future economic benefits to be generated by the patent.
17. Goodwill is the value of many favourable attributes that are intertwined in the business
enterprise. Goodwill can be identified only with the business as a whole and, unlike
other assets, cannot be sold separately. Goodwill can only be sold if the entire business
is sold.
18. (a) Long-lived assets are normally reported on the statement of financial position
under the headings “property, plant, and equipment”, “intangible assets” and
“goodwill.” The balances of the major classes of assets should be disclosed, as
well as the accumulated depreciation and accumulated amortization, either on the
statement of financial position or in the notes to the financial statements.
(b) The income statement reports, in the operating expenses section, depreciation
expense, amortization expense, any gain or loss on disposal of property, plant and
equipment, and any impairment losses.
(c) The statement of cash flows reports, in the investing activities section, any cash
paid to purchase long-lived assets and any cash received on their disposal.


19. The notes to the financial statements should disclose the balance of the major classes
of assets as well as the accumulated depreciation and amortization for depreciable and
amortizable assets if this information has not been reported directly in the financial
statements. The depreciation and amortization method(s) used and the useful lives or
rates should also be described. Under IFRS, companies must disclose if they are using
the cost or revaluation model for each class of long-lived assets and include a
reconciliation of the carrying amount at the beginning and end of period for each class
of long-lived assets. If the revaluation model is used, disclosure of any increases and
decreases from revaluation, as well as other information, is required. Information
relating to any impairment recorded must also be disclosed.
For companies using ASPE, the disclosure requirements are substantially reduced
because the revaluation model cannot be used.
20. Gains and losses recorded on the disposal of property, plant, and equipment are
classified in the operating section of the income statement because they are basically
an adjustment to deprecation, which is classified as an operating expense.
21. (a) Grocery stores usually have a high asset turnover and a low profit margin. This is
typical in industries that have high sales relative to assets and are in an industry
where there are many competitors.
(b) Railway companies normally have a low asset turnover because they are so
capital intensive. To compensate for this, companies such as these need to have
a high profit margin which is typical in an industry that is hard to enter due to high
capital barriers.
22. The return on assets ratio measures the return being generated by each dollar invested
in the business (profit ÷ average total assets). The return on assets can also be
calculated by multiplying the profit margin by the asset turnover ratio. The profit margin
measures how effective the business is at generating profit from its sales and the asset
turnover measures how well the company can generate sales from a given level of
assets. Together, the two ratios can be combined to measure how effective a company
is at generating profit from a given level of assets (return on assets). Therefore, if a
company wants to improve its return on assets, it can do so either by increasing the
margin it generates from each dollar of sales (profit margin) or by increasing the volume
of goods that is sells (asset turnover).


23.
($ in millions) 2012 2011
Return on assets
$403 $383
= 18.0% = 16.3%
$2,244 $2,343
Asset turnover
$2,226 $2,012
= 1.0 times = 0.9 times
$2,244 $2,343
Tim Hortons’ return on assets and asset turnover ratios improved in 2012 compared to
2011.

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 9-1
All of the expenditures, except the fence, should be included in the cost of the land.
Therefore, the cost of the land is $61,000 (cash price of $50,000 + legal fees of $2,500 +
removal of old building $5,000 + cleaning and grading costs of $3,500). The fence would be
included in the cost of land improvements.
BRIEF EXERCISE 9-2
The cost of the truck is $43,750 (invoice price $42,000 + installation of trailer hitch $1,000 +
painting and lettering $750). The expenditures for insurance and motor vehicle licence are
annual costs that do not benefit future periods and should be expensed and not added to the
cost of the truck.
BRIEF EXERCISE 9-3

(a) O
(b) C
(c) C
(d) C
(e) C
(f) O
(g) O
(h) C
(i) C
(j) O
BRIEF EXERCISE 9-4
(a) The depreciable amount is $80,000 ($86,000 – $6,000). With a 4-year useful life, annual
depreciation is $20,000 ($80,000 ÷ 4). Under the straight-line method, depreciation
expense is the same each year.
(b) Total depreciation over the truck’s life will be $20,000 per year × 4 years = $80,000

BRIEF EXERCISE 9-5

Depreciation expense for 2015 = $20,000 × 8/12 = $13,333
Depreciation expense for 2016 = $20,000
BRIEF EXERCISE 9-6
(a) Depreciation rate = 1 ÷ 4 = 25%
January 1 Depreciation December 31

Carrying amount Rate expense Carrying amount
2015 $86,000 25% $21,500 $64,500

2016 64,500 25% 16,125 48,375
2017 48,375 25% 12,094 36,281
2018 36,281 to residual value 30,281 6,000
$80,000
Calculations:
2015 Depreciation expense = $86,000 × 25% = $21,500

2016 Depreciation expense = ($86,000 – $21,500) × 25% = $16,125
2017 Depreciation expense = ($86,000 – $21,500 – $16,125) × 25% = $12,094
2018 Depreciation expense = ($86,000 – $21,500 – $16,125 – $12,094) × 25% = $9,070
(amount calculated of $9,070 is adjusted to $30,281 so that the carrying amount will
equal the residual value)
As explained in the chapter, the diminishing-balance method can require an adjustment in the
final year of depreciating an asset in order to equate the carrying amount to equal the
residual value. In the scenario illustrated in the question, the company stopped depreciating
the asset at the end of Year 4. This relatively short life was chosen for the purposes of this
comparative problem and resulted in a very large amount of depreciation expense in Year 4.
This can occur when the diminishing-balance method is used to depreciate an asset with a
short life. Because of this effect, the diminishing-balance method is often used on assets with
longer lives. In situations like this in real life, a company would revise the useful life of the
asset if it anticipated continuing to use the asset beyond Year 4.
(b) Total depreciation expense = $21,500 + $16,125 + $12,094 + $30,281 = $80,000
BRIEF EXERCISE 9-7
(A) (B) (C) [(A) × (B) × (C)] ÷12

(1 ÷ 4) # of Depreciation
Carrying amount Rate months expense
2015 $86,000 25% 8 $14,333

2016 ($86,000 – $14,333) 25% 12 17,917
= $71,667

BRIEF EXERCISE 9-8
The depreciable amount per unit is $0.10 per km. calculated as follows:
(Cost – Residual value) ÷ total km = ($33,000 – $500) ÷ 325,000 = $0.10
2014 125,000 km × $0.10 = $12,500 depreciation expense

2015 105,000 km × $0.10 = $10,500 depreciation expense
BRIEF EXERCISE 9-9
(a)
Carrying amount ($200,000 – $20,000) ÷ 5 = $36,000 × 2 = $72,000;
$200,000 – $72,000 = $128,000
(b)
Carrying amount $128,000
Recoverable amount 100,000
Impairment loss $ 28,000
BRIEF EXERCISE 9-10
(a) Depreciation Expense [(($144,000 – $4,000) ÷ 5) × 9/12] ........ 21,000

Accumulated Depreciation—Equipment ............................. 21,000
(b) Cash ......................................................................................... 42,000

Accumulated Depreciation—Equipment ................................... 77,000
Loss on Disposal ...................................................................... 25,000
Equipment ....................................................................... 144,000
Proceeds from sale $ 42,000

Cost of equipment $144,000
Less: Accumulated depreciation 77,000*
Carrying amount at date of disposal 67,000
Loss on disposal $(25,000)
* Depreciation Jan. 1, 2013 – Dec. 31, 2014

($144,000 – $4,000) ÷ 5 = $28,000 × 2 years $56,000
Depreciation Jan. 1, 2015 – Sept. 30, 2015
$28,000 × 9/12 21,000
Accumulated depreciation $77,000

BRIEF EXERCISE 9-11
(a) Accumulated Depreciation—Equipment ................................... 42,000

Equipment ............................................................................ 42,000
(b) Accumulated Depreciation—Equipment ................................... 40,000

Loss on Disposal ...................................................................... 2,000
Equipment ............................................................................ 42,000
Proceeds from sale $ 0

Cost of equipment $42,000
Less: Accumulated depreciation 40,000
Carrying amount at date of disposal 2,000
BRIEF EXERCISE 9-12

(a) (1) Apr. 2 Patents ................................................................ 180,000
Cash ............................................................ 180,000
(2) Dec. 31 Amortization Expense

($180,000 ÷ 5 = $36,000 × 9/12) ......................... 27,000
Accumulated Amortization—Patents ........... 27,000
(b) SURKIS CORPORATION

Statement of Financial Position (Partial)
December 31, 2015
Assets
Intangible assets
Patents $180,000
Less: Accumulated amortization 27,000
Carrying amount 153,000
BRIEF EXERCISE 9-13
(a) (1) June 1 Trademarks ......................................................... 1,000

Cash ............................................................ 1,000
(2) Dec. 1 Trademarks ......................................................... 10,000

Cash ............................................................ 10,000
(b) The trademarks do not need to be amortized as these normally have an indefinite life.

BRIEF EXERCISE 9-14

(a) I
(b) PPE
(c) PPE
(d) PPE
(e) I
(f) NA (current asset)
(g) NA (shareholders’ equity)
(h) NA (expense)
(i) PPE
(j) PPE
(k) PPE
(l) I
(m) NA (expense)
(n) I
(o) NA (expense)
(p) I
BRIEF EXERCISE 9-15
CANADIAN TIRE CORPORATION, LIMITED

December 29, 2012
(in millions)
Property, plant, and equipment

Land ........................................................................................ $ 744.2
Buildings .............................................................. $2,683.7
Less: Accumulated depreciation .......................... 1,102.9 1,580.8
Fixtures and equipment ........................................ $880.4
Less: Accumulated depreciation .......................... 591.4 289.0
Other property and equipment ............................. $1,153.7
Less: Accumulated depreciation ........................ 424.2 729.5
Total property, plant, and equipment .................................... $3,343.5
Intangible assets
Finite-life intangible assets ................................... $932.6
Less: Accumulated amortization ...................... 604.6 $328.0
Indefinite-life intangible assets ................................................ 385.0
Total intangible assets .......................................................... 713.0
Goodwill ...................................................................................... 376.9
Total long-lived assets .................................................... $4,433.4

BRIEF EXERCISE 9-16
(a) (1) Coke has a better return on assets ratio.

(2) Pepsi has a better asset turnover ratio.
(b) Based on the two ratios given, I would expect Coke to have a better profit margin.
Profit margin × Asset turnover = Return on assets

Coke: Profit margin × 0.6 = 10.9%; Solving for profit margin = 18.2%
Pepsi: Profit margin × 0.9 = 8.4%; Solving for profit margin = 9.3%
BRIEF EXERCISE 9-17
(a)
($ in U.S. millions) 2012 2011
$1,948 $1,726
$1,896 + $1,858 $1,858 + $1,335
(1) Asset turnover � � � �
2 2
$148 $234
(2) Profit margin = 7.6 % = 13.6 %
$1,948 $1,726
$148 $234
$1,896 + $1,858 $1,858 + $1,335
(3) Return on assets � � � �
2 2
= 7.9% = 14.7%
(b) The return on assets changed primarily due to a change in profit margin.

SOLUTIONS TO EXERCISES
EXERCISE 9-1
(a) Under the cost principle, the acquisition cost for property, plant, and equipment
includes all expenditures necessary to acquire the asset and make it ready for its
intended use. For example, the cost of factory equipment includes the purchase price,
freight costs paid by the purchaser, insurance costs during transit, and expenditures
required in assembling, installing, and testing the equipment.
(b) 1. Land
2. Land
3. Land
4. Land Improvements
5. Buildings
6. Buildings
7. Vehicles
8. Vehicles
9. Vehicles Expense
10. Prepaid Insurance
EXERCISE 9-2
(a) Cost of equipment = $75,000 + $500 delivery + $200 insurance in transit
+ $2,800 testing and installation
= $78,500
The one-year insurance payment is for an annual expense and unlike the insurance for
the equipment in transit, was not incurred to get the asset ready for use. Training costs
are also expensed as they were incurred to get staff ready to use the machinery.
These costs were not incurred on the machinery itself.
(b) April 1, 2015 because that is the date when the asset was ready for use.
(c) The company should use the straight-line method since the economic benefits are
expected to be consumed evenly over the machinery’s useful life.
(d) Depreciation expense in 2015 would be $5,888 ($78,500 ÷ 10 × 9/12).

EXERCISE 9-3
(a)
(1) Straight-line method

($172,000 – $16,000)
Depreciation = = $39,000
4
2012 expense = $39,000 × 9/12 = $29,250
2013, 2014, 2015 expense = $39,000 each year
2016 expense = $39,000 × 3/12 = $9,750
(2) Diminishing balance rate = 1 ÷ 4 = 25% × 2 = 50%
January 1 Depreciation December 31

Carrying amount Rate expense Carrying amount
2012 $172,000 50% $86,000 × 9/12= $64,500 $107,500

2013 107,500 50% 53,750 53,750
2014 53,750 50% 26,875 26,875
2015 26,875 to residual value 10,875 16,000
2016 16,000 0 16,000
Depreciation ceases in 2015 as the carrying amount cannot fall below residual value.
(3) Units of production: Depreciation expense per unit =
($172,000 – $16,000)
= $15.60
10,000 hours
Units Expense Depreciation

Used Per Unit Expense
2012 1,500 $15.60 $ 23,400
2013 2,200 15.60 34,320
2014 2,300 15.60 35,880
2015 2,100 15.60 32,760
2016 1,900 15.60 29,640
10,000 $156,000
(b) All three methods result in the same amount depreciation expense over the life of the
asset and so the same profit will be experienced as well. The choice of depreciation
method will have no impact on cash flow.

EXERCISE 9-4
(a)
Machine 1 Machine 2
Cost $800,000 Cost $120,000
Less: Residual value 40,000 Less: Residual value 5,000
Depreciable cost $760,000 Depreciable cost $115,000
Useful life in years 20 5
Annual depreciation $760,000 ÷ 20 = $38,000 $115,000 ÷ 5 = $23,000
(b) Accumulated depreciation, December 31, 2014

Machine 1 ($38,000 × 10 years) $380,000
Machine 2 ($23,000 × 2 years) 46,000
Carrying amount, December 31, 2014

Machine 1 ($800,000 – $380,000) $420,000
Machine 2 ($120,000 – $46,000) 74,000
(c) If the company accepts Lindy’s proposed changes in useful life and residual value, the
2015 depreciation expense for Machine 1 will be lower and the depreciation expense
for Machine 2 will be higher than for 2014. The depreciation expense for Machine 1
will be lower due to the estimated longer useful life and higher residual value. The
depreciation expense for Machine 2 will be higher due to the shorter estimated useful
life and lower residual value.

EXERCISE 9-5
(a) The amount paid for the equipment is $1,100.
Jan. 1 Equipment ..................................................................... 1,100

Cash ...................................................................... 1,100
(b) The amount of depreciation expense is $100.
Dec. 31 Depreciation Expense ................................................... 100

Accumulated Depreciation—Equipment ................ 100
(c) The amount of the gain on disposal is $50 and is derived from the disposal entry that
follows.
Dec. 31 Cash .............................................................................. 450

Accumulated Depreciation—Equipment ........................ 40
Gain on Disposal ................................................... 50
Equipment ............................................................. 440
(d) The amount of the impairment loss on the remaining equipment is $55.
Dec. 31 Impairment Loss............................................................ 55

Accumulated Depreciation—Equipment ................ 55

EXERCISE 9-6
(a)
(1) Straight-line method
$5,000 − $500
= $1,125 each year
4
(2) Double diminishing-balance (DDB) method
DDB Rate: 1 ÷ 4 = 25% × 2 = 50%
Year 1: $5,000 × 50% = $2,500

Year 2: ($5,000 – $2,500) × 50% = $2,500 × 50% = $1,250
Year 3: ($5,000 – $2,500 – $1,250) × 50% = $1,250 × 50% = $625
Straight-Line Double Diminishing-Balance

Depreciation Carrying Depreciation Carrying
Expense Amount Expense Amount
Year 1 $1,125 $3,875 $2,500 $2,500
Year 2 1,125 2,750 1,250 1,250
Year 3 1,125 1,625 625 625
Total $3,375 $4,375
(b) (1) Straight-line method
Proceeds – carrying amount = Gain (loss)

$1,225 – $1,625 = ($400)
(2) Double diminishing-balance method
Proceeds – carrying amount = Gain (loss)

$1,225 – $625 = $600
(c) (1) Straight-line method
Depreciation expense: $3,375 + Loss: $400 = $3,775
(2) Double-diminishing balance method
Depreciation expense: $4,375 – Gain: $600 = $3,775
Note: There is no difference in the total expense over the life of the asset.

EXERCISE 9-7
Jan. 1 Cash .............................................................................. 18,000

Accumulated Depreciation—Vehicles
([$62,000 – $6,000] ÷ 4 × 3) .......................................... 42,000
Loss on Disposal [$18,000 – ($62,000 – $42,000)] ....... 2,000
Vehicles ............................................................... 62,000
Sept 1 Depreciation Expense ($10,980 ÷ 3 × 8/12) .................. 2,440

Accumulated Depreciation—Equipment ................ 2,440
1 Cash .............................................................................. 500

Accumulated Depreciation—Equipment
($10,980 ÷ 3 × 2 = $7,320; $7,320 + $2,440) ................ 9,760
Loss on Disposal [$500 – ($10,980 – $9,760)] .............. 720
Equipment ............................................................. 10,980
Dec. 30 Depreciation Expense ($150,000 ÷ 10) ......................... 15,000

Accumulated Depreciation—Equipment ................ 15,000
30 Accumulated Depreciation—Equipment
[($150,000 ÷ 10) × 10] ................................................... 150,000
Equipment ............................................................. 150,000

EXERCISE 9-8
1. Depreciation is the process of allocating the cost of a long-lived asset to expense over
the asset’s useful life. Because the value of land generally does not decline with time
and usage, its usefulness and economic benefits do not decline. In addition, the useful
life of land is indefinite. Therefore it would be incorrect for the student to depreciate the
land.
2. Goodwill is an intangible asset with an indefinite life. According to generally accepted

accounting principles, goodwill is not amortized but reviewed annually for impairment. If
a decline in value has occurred, goodwill is written down and an impairment loss is
recorded on the income statement. Therefore, the amortization entry should be
reversed and no decline in value recorded unless an impairment in value occurs.
3. International Financial Reporting Standards (IFRS) permit companies to use the

revaluation model for the subsequent measurement of property, plant, and equipment.
To qualify for the revaluation model, the fair value of the building must be reliably
measurable, the revaluations must be carried out on an ongoing basis, and the entire
category of buildings must be revalued to fair value. Using the revaluation model for
one building is not appropriate, especially since depreciation is being calculated. It is
also unlikely that the revaluation model will be relevant to all users of Chin’s financial
statements. This fair value adjustment should be reversed and the building carried at
cost.

EXERCISE 9-9
(a)
Jan. 1 Patents ........................................................................... 120,000

Cash ....................................................................... 40,000
Mar. 1 Franchises ...................................................................... 540,000

Cash ....................................................................... 40,000
Bank Loan Payable ................................................ 500,000
Sept. 1 Trademarks .................................................................... 75,000

Cash ....................................................................... 75,000
1 Trademarks .................................................................... 35,000

Cash ....................................................................... 35,000
(b)
Dec. 31 Amortization Expense ..................................................... 20,000
Accumulated Amortization—Patents ...................... 20,000
($120,000 ÷ 6 = $20,000)
31 Amortization Expense ..................................................... 75,000

Accumulated Amortization—Franchises ................. 75,000
[($540,000 ÷ 6) × 10/12 = $75,000]
No amortization recorded on the trademark purchased Sept. 1

EXERCISE 9-10
(a)
Jan. 2 Patents ........................................................................... 40,000

Cash ....................................................................... 40,000
April 1 Goodwill .......................................................................... 300,000

Cash ....................................................................... 300,000
July 1 Franchises ...................................................................... 250,000

Cash ....................................................................... 250,000
Sept. 1 Research Expenses ....................................................... 150,000

Cash ....................................................................... 150,000
30 Development Costs ........................................................ 50,000

Cash ....................................................................... 50,000
Dec. 31 Amortization Expense ..................................................... 8,000

Accumulated Amortization—Patents ...................... 8,000
($40,000 ÷ 5 = $8,000)
31 Given that recoverable amount exceeded carrying amount for intangible assets,
no impairment loss is recognized.
31 Impairment Loss ............................................................. 30,000

Goodwill .................................................................. 30,000
(b)
COLLINS LTD.
December 31, 2015
Intangible assets
Patents ................................................................. $40,000
Less: Accumulated amortization .......................... 8,000 $ 32,000
Franchise ............................................................. 250,000
Development costs ............................................... 50,000
Total intangible assets................................................. 332,000
Goodwill ...................................................................... 270,000

EXERCISE 9-11
(a) Account Financial Statement Section
Accumulated depreciation— Statement of Financial Property, plant, and

buildings Position equipment

fixtures and equipment Position equipment

leasehold improvements Position equipment
Accumulated depreciation— Statement of Financial Intangible assets

Software Position
Amortization expense Income Statement Operating expenses
Buildings Statement of Financial Property, plant, and

Position equipment
Depreciation expense Income Statement Operating expenses
Fixtures and equipment Statement of Financial Property, plant, and

Position equipment
Goodwill Statement of Financial Goodwill

Position
Land Statement of Financial Property, plant, and

Position equipment
Impairment loss Income Statement Operating expenses
Leasehold improvements Statement of Financial Property, plant, an

Position equipment
Operating leases Income Statement Operating expenses
Reversal of impairment loss Income Statement Operating expenses
Software Statement of Financial Intangible assets

Position
Trademarks Statement of Financial Intangible assets

Position

EXERCISE 9-11 (Continued)

(b)
REITMANS (CANADA) LIMITED
February 3, 2013
(in thousands)
Property, plant, and equipment

Land ........................................................................................ $ 5,860
Buildings ................................................................................... $53,149
Less: Accumulated depreciation............................................... 22,467 30,682
Fixtures and equipment ............................................................ $166,756
Leasehold improvements ........................................................ $189,730
Total property, plant, and equipment 205,131
Intangible assets
Software ................................................................................... $28,916
Less: Accumulated amortization............................................... 10,191 18,725
Trademarks .............................................................................. 499
Total intangible assets ..................................................... 19,224
Goodwill ............................................................................................ 42,426
EXERCISE 9-12
Company A: Costco (retail)
Company B: Suncor (oil and gas)
The company most likely operating in the retail industry is Company A (Costco) because it
has the higher asset turnover and lower profit margin. It is reasonable to expect retail
companies like Costco to sell goods at a higher rate (volume) at a lower profit margin than a
company in the oil and gas industry.
The oil and gas industry requires a higher investment in long-lived assets and can be
expected to have a lower asset turnover ratio and a higher profit margin.

EXERCISE 9-13
(a) ($ in millions)
$550
(1) Return on assets = = 7.9%
($7,200 + $6,800)
2
$14,000
(2) Asset turnover = = 2.0 times
($7,200 + $6,800)
2
$550
(3) Profit margin = = 3.9%
$14,000
(b) Profit Margin × Asset Turnover = Return on Assets
[(profit ÷ net sales) × (net sales ÷ average total assets)] = profit ÷ average total assets
= ($550 ÷ $14,000) × [$14,000 ÷ (($7,200 + $6,800) ÷ 2)]

= ($550 ÷ $14,000) × [$14,000 ÷ $7,000]
= 0.0392857 × 2.0 = 0.0785714
= 7.85714%
(c) Ajax’s ratios are better than the industry averages in every respect. Ajax can generate a
higher return on assets through higher volume of sales or greater efficiencies in using
its asset base to generate those sales. Overall Ajax is performing better than industry.

SOLUTIONS TO PROBLEMS
PROBLEM 9-1A
Account Debited Explanation
1. Equipment Makes the equipment more productive or efficient.
2. Land improvements Non-permanent land expenditure.
3. Buildings Capital expenditure, which makes the office more productive.

If the air conditioning system had a significant cost and
different useful life from the building an argument could be
made to treat it as a separate asset (component).
4. Repair and maintenance Does not extend the life of the building or make it more
expense productive or efficient.
If the loss was considered to be significant, it would be

recorded separately as a loss due to labour dispute, rather
than as repair and maintenance expense.
5. Equipment Cost to prepare the equipment for use.
6. Repair and maintenance Does not extend the life of the machinery or make it more
If the damage was covered by insurance, a receivable (from
the insurance company) account would be debited.
If the loss was considered to be significant, it would be
recorded separately as a loss due to damages, rather than as
repair and maintenance expense.
7. Repair and maintenance Does not extend the life of the truck or make it more
8. Repair and maintenance Does not extend the life of the factory or make it more
expense productive or efficient. Painting is a recurring expense over
time.
9. Vehicles The future operating costs will be substantially reduced.
10. Repair and maintenance Light bulbs are expected to be replaced frequently.
expense

PROBLEM 9-2A
(a)
Feb. 7 Land ............................................................................. 550,000

Cash .................................................................... 150,000
Mortgage Payable ................................................ 400,000
Note: There is no intention of using the old building so the purchase price really
relates to only the land.
9 Land ............................................................................. 11,000

Cash .................................................................... 11,000
15 Land ............................................................................. 30,000

Cash .................................................................... 30,000
17 Cash ............................................................................ 8,000

Land ..................................................................... 8,000
28 Land ............................................................................. 2,000

Cash .................................................................... 2,000
Mar. 2 Buildings ...................................................................... 36,000

Cash .................................................................... 36,000
July 2 Buildings ...................................................................... 1,300,000

Cash .................................................................... 340,000
Bank Loan Payable .............................................. 960,000
3 Prepaid Insurance ........................................................ 5,000

Cash .................................................................... 5,000
Aug. 29 Land Improvements ..................................................... 24,000

Cash .................................................................... 24,000

PROBLEM 9-2A (Continued)
(b)
Land
Date Land Improvements Buildings
Feb. 7 $550,000
9 11,000
15 30,000
17 (8,000)
28 2,000
Mar. 2 $ 36,000
July 2 1,300,000
Aug. 29 $24,000 000000000
$585,000 $24,000 $1,336,000
(c) Land is not depreciated, so no depreciation is calculated on this asset.
The building and land improvements would be depreciated once the asset is available
for use. In the case of the building, it appears that its construction is completed on July 2
and the land improvements are available for use on August 29. If depreciation is
calculated to the nearest month, then the building would be depreciated effective July 1
and the land improvements September 1.

PROBLEM 9-3A
(a)
Invoice price $360,000
Delivery cost 2,000
Installation and testing 8,000
Total cost $370,000
The one-year insurance policy is not included as it benefits only the current period. It
would be recorded as Prepaid Insurance and allocated to Insurance Expense throughout
the period.
(b) (1) Straight-line depreciation expense (per year)
($370,000 – $80,000)
= $58,000
5
STRAIGHT-LINE DEPRECIATION
Calculation End of Year

Depreciable Depreciation Depreciation Accumulated Carrying
Year Cost × Rate 2 = Expense Depreciation Amount
2015 $290,0001 20% × 8/12 $38,667 $ 38,667 $331,333

2016 0,290,000 20% 58,000 96,667 273,333
2017 0, 290,000 20% 58,000 154,667 215,333
2018 290,000 20% 58,000 212,667 157,333
2019 290,000 20% 58,000 270,667 99,333
2020 290,000 20% × 4/12 19,333 290,000 80,000
1
$370,000 – $80,000 = $290,000
2
1 ÷ 5 years = 20%


(b) (Continued)
(2)
DOUBLE DIMINISHING–BALANCE DEPRECIATION

Opening
Carrying Depreciation Depreciation Accumulated Carrying
Year Amount × Rate1 Expense Depreciation Amount
2015 $370,000 40% × 8/12 $ 98,667 $ 98,667 $271,333

2016 271,333 40% 108,533 207,200 162,800
2017 162,800 40% 65,120 272,320 97,680
2018 97,680 40% 17,6802 290,000 80,000
2019 80,000 40% 0 290,000 80,000
2020 80,000 40% 0 290,000 80,000
1
1 ÷ 5 years = 20% × 2 = 40%
2
Depreciation will cease in 2018 once the total accumulated depreciation is $290,000. This
makes the carrying amount $80,000 which is equal to the residual value. No depreciation is
taken on assets once the carrying amount has reached the residual value.
Profit is lower in the earlier years of the machine’s useful life if the double diminishing-
balance method is used.
(c) Yes, the cost to recycle the machine at the end of its useful life would need to be
estimated. The cost to recycle would be added to the cost of the machine and allocated
over its useful life, increasing the annual depreciation charge.

PROBLEM 9-4A
(a) (1)

Year Cost × Rate1 Expense Depreciation Amount
$122,000
2
2015 $120,000 25% × 9/12 $22,500 $ 22,500 99,500
2016 ,,120,000 25% 30,000 52,500 69,500
2017 ,,120,000 25% 30,000 82,500 39,500
2018 ,,120,000 25% 30,000 112,500 9,500
2019 ,,120,000 25% × 3/12 7,500 120,000 2,000
1
1 ÷ 4 years = 25%
2
$122,000 – $2,000 = $120,000
(2)

Opening
$122,000
2015 $122,000 50% × 9/12 $45,750 $ 45,750 76,250
2016 ,, 76,250 50% 38,125 83,875 38,125
2017 ,, 38,125 50% 19,062 102,937 19,063
2018 ,, 19,063 50% 9,532 112,469 9,531
2019 9,531 50% × 3/122 7,5312 120,000 2,000
1
1 ÷ 4 years = 25% × 2 = 50%
2
Adjusted so that carrying amount would equal residual value of $2,000 ($9,531 × 50%
× 3/12 = $1,191; $9,531 – $2,000 = $7,531) at the end of the useful life.


(a) (Continued)
(3)
UNITS-OF-PRODUCTION DEPRECIATION

Units-of- Depreciation Depreciation Accumulated Carrying
Year Production × Cost/Unit 1 = Expense Depreciation Amount
$122,000
2015 7,400 $3 $22,200 $ 22,200 99,800
2016 10,200 3 30,600 52,800 69,200
2017 9,900 3 29,700 82,500 39,500
2018 10,000 3 30,000 112,500 9,500
2019 2,500 3 7,500 120,000 2,000
1
Depreciable cost per unit = ($122,000 – $2,000) ÷ 40,000 units = $3 per unit
(b) Double-
Straight- Units-of- Diminishing
Line Production Balance
Total depreciation expense $120,000 $120,000 $120,000
Accumulated depreciation 120,000 120,000 120,000
(c) Depreciation is a non-cash expense so the cash flows are not affected.
(d) I would recommend the units-of-production method as it best reflects the pattern of the
economic benefits produced by the equipment given the variability of usage each year.

PROBLEM 9-5A
(a) Equipment
Cost, January 1, 2013 $65,000
Less: Residual value 3,000
Depreciable cost 62,000
Useful life in years ÷ 8
Annual depreciation ($62,000 ÷ 8) $ 7,750
The equipment’s accumulated depreciation on January 1, 2015 will be $15,500

($7,750 × 2 years) and the carrying amount will be $49,500 ($65,000 – $15,500).
(b) You would expect the depreciation expense to increase in 2015 after the
change in useful life because the undepreciated cost will be expensed over a shorter
period of time.
(c) The change in the useful life should only affect current and future periods. The
rationale is that the original estimate was based on information known at the time the
asset was purchased and the revision is based on new information and should only
affect future periods. In addition, if prior periods were regularly restated, users would
have less confidence in the financial statements.
(d) If the company had not revised the remaining useful life, the total depreciation
expense over the equipment’s life would be the depreciable cost of $62,000. The
accumulated depreciation at the end of the equipment’s useful life would be $62,000
and the carrying amount would be $3,000.
(e) The total depreciation expense would not change after the useful life has been
revised. There would be no changes to the accumulated depreciation or the carrying
amount at the end of the equipment’s useful life. The undepreciated cost of the
equipment has not changed; only the length of time over which it will be depreciated
has been revised.

PROBLEM 9-6A
(a) 2013
Mar. 1 Equipment............................................................ 130,000
Cash ............................................................ 130,000
(b) DIMINISHING–BALANCE DEPRECIATION

Opening
Year Amount × Rate 1 Expense Depreciation Amount
2013 $130,000 20% × 6/12 $13,000 $13,000 $117,000

2014 117,000 20% 23,400 36,400 93,600
2015 93,600 20% 18,720 55,120 74,880
Sep./15 74,880 20% × 1/12 1,248 56,368 73,632
1
1 ÷ 5 years = 20%
2013
Aug. 31 Depreciation Expense .......................................... 13,000
Accumulated Depreciation—Equipment ...... 13,000
2014
2015

(c) 2015
(1, 2, 3)
Sept. 30 Depreciation Expense .......................................... 1,248
Accumulated Depreciation—Equipment ..... 1,248
(1) Sept. 30 Cash ................................................................... 60,000

Accumulated Depreciation—Equipment .............. 56,368
Loss on Disposal ................................................. 13,632
Equipment .................................................. 130,000
Cash proceeds .............................................. $ 60,000

Carrying amount ............................................ 73,632
Loss on disposal............................................ $(13,632)
(2) Sept. 30 Cash ................................................................... 80,000

Gain on Disposal ........................................ 6,368
Equipment .................................................. 130,000
Cash proceeds .............................................. $80,000

Carrying amount ........................................... 73,632
Gain on disposal............................................ $ 6,368
(3) Sept. 30 Accumulated Depreciation—Equipment .............. 56,368

Loss on Disposal ................................................. 73,632
Equipment .................................................. 130,000
Cash proceeds .............................................. $ 0

Carrying amount ............................................ 73,632
Loss on disposal............................................ $(73,632)

PROBLEM 9-7A
(a)
(1) Straight-line
Depreciation Expense =
($70,000 – $10,000)
= $20,000
3
2015
Mar. 1 Equipment ........................................................................... 70,000
Cash ......................................................................... 70,000
Dec. 31 Depreciation Expense ......................................................... 16,667

Accumulated Depreciation—Equipment ................... 16,667
($20,000 × 10/12 = $16,667)
2016
Nov. 30 Depreciation Expense ......................................................... 18,333
($20,000 × 11/12 = $18,333)
30 Cash .................................................................................... 18,000

Accumulated Depreciation—Equipment ($16,667 + $18,333) 35,000
Loss on Disposal ................................................................. 17,000
Equipment................................................................. 70,000
(2) Single diminishing-balance
Depreciation Rate = 1 ÷ 3 years = 33% (note textbook convention to round rates to two
decimal spots 0.33 or 33%)
2015
Mar. 1 Equipment ........................................................................... 70,000
Cash ......................................................................... 70,000

($70,000 × 33% × 10/12 = $19,250)


(a) (Continued)
2016
[($70,000 – $19,250) × 33% × 11/12 = $15,352]
Nov. 30 Cash .................................................................................... 18,000

Loss on Disposal ................................................................. 17,398
Equipment................................................................. 70,000
(3) Units-of-Production
Depreciable cost per unit =
($70,000 – $10,000)
= $5.00
12,000
2016
Mar. 1 Equipment ........................................................................... 70,000
Cash ......................................................................... 70,000

(4,900 × $5 = $24,500)
2016
(5,600 × $5 = $28,000)
30 Cash .................................................................................... 18,000

Gain on Disposal ...................................................... 500
Equipment................................................................. 70,000

(b)
Straight Diminishing Units-of-

-Line -Balance Production
Depreciation expense
2015 $16,667 $19,250 $24,500
2016 18,333 15,352 28,000
Total depreciation
for two years 35,000 34,602 52,500
+ Loss (or – gain) on disposal 17,000 17,398 (500)
= Net expense for two years $52,000 $52,000 $52,000

PROBLEM 9-8A
(a) April 1 Land ................................................................ 4,400,000

Cash ....................................................... 1,100,000
Mortgage Payable ................................... 3,300,000
May 1 Depreciation Expense ..................................... 93,333

Accumulated Depreciation—Equipment. 93,333
($2,800,000 ÷ 10 × 4/12 = $93,333)
1 Cash ............................................................... 300,000

Accumulated Depreciation—Equipment ......... 2,333,333
Loss on Disposal ............................................ 166,667
Equipment............................................... 2,800,000
Cost $2,800,000
Accumulated depreciation—equipment
[($2,800,000 ÷ 10) × 8 + $93,333)] 2,333,333
Cash proceeds 300,000
Loss on disposal $ (166,667)
June 1 Cash ............................................................... 900,000

Notes Receivable ............................................ 2,700,000
Land ........................................................ 1,400,000
Gain on Disposal .................................... 2,200,000
July 1 Equipment....................................................... 2,200,000

Cash ....................................................... 2,200,000
Dec. 31 Depreciation Expense ..................................... 100,000

Accumulated Depreciation—Equipment . 100,000
($1,000,000 ÷ 10 = $100,000)
31 Accumulated Depreciation—Equipment ......... 1,000,000

Equipment................................................. 1,000,000
31 Impairment Loss ($23,000,000* – $20,000,000) 3,000,000

Land ........................................................ 3,000,000
*Carrying amount = $20,000,000 + $4,400,000 – $1,400,000 =

$23,000,000


(b) Dec. 31 Depreciation Expense ....................................... 2,435,000
Accumulated Depreciation—Buildings ...... 2,435,000
($97,400,000 ÷ 40 = $2,435,000)
31 Depreciation Expense ....................................... 14,730,000

Accumulated Depreciation—Equipment ... 14,730,000
$146,200,000* ÷ 10 $14,620,000
$2,200,000 ÷ 10 × 6/12 110,000
$14,730,000
* $150,000,000 – $2,800,000 – $1,000,000 = $146,200,000
31 Interest Expense ............................................... 148,500

Interest Payable ........................................ 148,500
($3,300,000 × 6% × 9/12 = $148,500)
31 Interest Receivable ........................................... 78,750

Interest Revenue ...................................... 78,750
($2,700,000 × 5% × 7/12 = $78,750)
(c)
YOUNGSTOWN LIMITED
December 31, 2015
Property, plant, and equipment1

Land .................................................................. $ 20,000,000
Buildings............................................................ $97,400,000
Less: Accumulated depreciation ....................... 64,635,000 32,765,000
Equipment ......................................................... $148,400,000
Total property, plant, and equipment .......... $135,575,000
1
See T accounts on the following page.

(c) (Continued)
Land
Jan. 1, 2015 20,000,000 June 1, 2015 1,400,000

April 1, 2015 4,400,000 Dec. 31, 2015 3,000,000
Dec. 31, 2015 Bal. 20,000,000
Buildings
Jan. 1, 2015 97,400,000
Dec. 31, 2015 Bal. 97,400,000
Equipment
Jan. 1, 2015 150,000,000 May 1, 2015 2,800,000

July 1, 2015 2,200,000 Dec. 31, 2015 1,000,000
Dec. 31, 2015 Bal. 148,400,000
Accumulated Depreciation—Buildings
Jan. 1, 2015 62,200,000

Dec. 31, 2015 2,435,000
Dec. 31, 2015 Bal. 64,635,000
May 1, 2015 2,333,333 Jan. 1, 2015 54,000,000

Dec. 31, 2015 1,000,000 May 1, 2015 93,333
Dec. 31, 2015 100,000
Dec. 31, 2015 14,730,000
Dec. 31, 2015 Bal. 65,590,000

PROBLEM 9-9A
(a) (b) (c) (d)
1. yes Goodwill not amortized N/A
2. no N/A N/A Assets under Finance Leases, Statement

of Financial Position, Property, plant and
equipment
3. yes Franchises amortized N/A
4. yes Patents amortized N/A
6. no N/A N/A Not recorded or reported
7. no N/A N/A Rent (Lease) Expense, Income

Statement, Operating expenses
8. yes Trademarks not amortized N/A
9. no N/A N/A Professional Fees Expense, Income

10. no N/A N/A Research Expenses, Income Statement,

Operating expenses

PROBLEM 9-10A
(a) Jan. 5 Trademarks ............................................................. 7,000

Cash ................................................................. 7,000
July 1 Research Expenses ................................................ 210,000

Cash ................................................................. 210,000
1 Development Costs................................................. 50,000

Cash ................................................................. 50,000
Sept. 1 Advertising Expense ............................................... 60,000

Cash ................................................................. 60,000
Oct. 1 Copyrights............................................................... 180,000

Cash ................................................................. 180,000
Dec. 31 Impairment Loss ($90,000 – $125,000) .................. 35,000

Goodwill ........................................................... 35,000
(b) Dec. 31 Amortization Expense ($36,000 ÷ 4) ....................... 9,000

Accumulated Amortization—Copyrights ........... 9,000
31 Amortization Expense ............................................. 11,250

($180,000 ÷ 4 × 3/12 = $11,250)

Accumulated Amortization—Development Costs 1,250
($50,000 ÷ 20 × 6/12 = $1,250)

(c)
GHANI CORPORATION
December 31, 2015
Intangible Assets
Finite life intangible assets

Development costs .............................................. $50,000
Copyrights ........................................................... $216,0001
Less: Accumulated amortization .......................... 38,2502 177,750
Indefinite life intangible assets
Trademarks ............................................................................... 61,0003
Goodwill ............................................................................................. 90,0004
Total intangible assets .................................................... $377,500
1
Copyrights: $36,000 + $180,000 = $216,000
2
Accumulated amortization
Copyright (#1): $18,000 + $9,000 $27,000
Copyright (#2) 11,250
$38,250
3
Trademarks: $54,000 + $7,000 = $61,000
4
Goodwill: $125,000 – $35,000 = $90,000

PROBLEM 9-11A
(a) Second Cup (4 ................................ Starbucks

(in CAD $ millions) ......................... (in U.S. $ millions)
$(9.4) $1,383.8
(1) Profit margin = (35.7)% = 10.4 %
$26.3 $13,299.5
$26.3 $13,299.5
(2) Asset turnover
$88.7 + $105.6 $8,219.2 + $7,360.4
� � � �
2 2
$(9.4) $1,383.8
$88.7 + $105.6 $8,219.2 + $7,360.4
(3) Return on assets � � � �
2 2
= (9.7)% = 17.8%
(b)
$5.9
(1) Profit margin = 22.4%
$26.3
$26.3
(2) Asset turnover
$104.0 + $105.6
� �
2
= 0.3 times (unchanged)
$5.9
(3) Return on assets
$104.0 + $105.6
� �
2
= 5.6%


(c) The ratios, as restated for Second Cup, of part (b) should be used to make a proper
comparison between the two companies. Due to the nature and size of the impairment
loss recorded for the goodwill and trademarks, it would not be fair to attempt to make a
comparison without taking the impairment loss into consideration. The impairment loss
is unusual as is unlikely to recur in the immediate future.
In spite of the use of revised ratios, Second Cup has a low asset turnover and poor
return on assets, when compared to Starbucks whose ratios exceed industry averages.
On the other hand, with the exclusion of the impairment loss, Second Cup shows a
much stronger profit margin compared to Starbucks and compared to the industry
average.

PROBLEM 9-12A
(a) (in thousands) Delicious ................................... Scrumptious
$350 $180
(1) Profit margin 2015 = 11.3% = 9.5%
$3,100 $1,900
$150 $200
Profit margin 2014 = 10.0% = 11.8%
$1,500 $1,700
$3,100 $1,900
$2,000 + $1,100 $800 + $900
(2) Asset turnover 2015 � � � �
2 2
$1,500 $1,700
$1,100 + $1,000 $900 + $1,000
Asset turnover 2014 � � � �
2 2
$350 $180
$2,000 + $1,100 $800 + $900
(3) Return on assets 2015 � � � �
2 2
= 22.6% = 21.2%
$150 $200
$1,100 + $1,000 $900 + $1,000
Return on assets 2014 � � � �
2 2
= 14.3% = 21.1%
(b) Delicious Limited increased its profit margin from 10.0% to 11.3% and its asset
turnover from 1.4 times to 2.0 times. The increases in these two ratios multiplied to
generate a substantial increase in Delicious’ return on assets (return on assets = profit
margin × asset turnover).
Conversely, Scrumptious Limited suffered a decrease in its profit margin from 11.8% to
9.5%. This decrease was offset by an increase in its asset turnover from 1.8 times to
2.2 times. The decrease in the profit margin was offset by the increase in the asset
turnover and resulted in no substantial change in the return on assets.

PROBLEM 9-1B
Account Debited Explanation
1. Equipment Capital expenditure, which makes the equipment more

productive and/or extends its useful life.
2. Repair and Maintenance Operating expenditure that does not make the equipment
Expense more productive nor extend its useful life. Likely benefits only
the current period.
3. Equipment Capital expenditure, which makes the equipment more

productive.
Expense more productive nor extend its useful life.
5. Training Expense Operating expenditure that does not increase the productivity
of the equipment and current accounting policies do not
recognize the cost of human capital.
Expense more productive nor extend its useful life. Painting is a
recurring expense.
7. Prepaid Insurance Operating expenditure as it benefits the current period only.
8. Operating Expenses Reorganization of the warehouse is an ongoing activity so

should be expensed even though efficiency should increase.
9. Equipment Capital expenditure: a one time cost which will benefit more
than one period of time, and likely allows the operator to use
the equipment longer and more productively.
Expense more productive nor extend its useful life.

PROBLEM 9-2B
(a)
Jan. 22 Land ............................................................................... 440,000

Cash .................................................................... 110,000
Mortgage Payable ................................................ 330,000
Note: There is no intention of using the old building so the purchase price really
relates to only the land.
24 Land ............................................................................... 9,000

Cash .................................................................... 9,000
31 Land ............................................................................... 50,000

Cash .................................................................... 50,000
Feb. 13 Land ............................................................................... 16,000

Cash .................................................................... 16,000
28 Cash ............................................................................... 15,000

Land ..................................................................... 15,000
Mar. 14 Buildings ......................................................................... 68,000

Cash .................................................................... 68,000
Apr. 22 Buildings ......................................................................... 34,000

Cash .................................................................... 34,000
June 15 Buildings ......................................................................... 600,000

Cash .................................................................... 150,000
Sept. 29 Buildings ......................................................................... 600,000

Cash .................................................................... 200,000
Oct. 1 Land Improvements ........................................................ 84,000

Cash .................................................................... 84,000

PROBLEM 9-2B (Continued)
(b)
Date Land Land Improvements Buildings
Jan. 22 $440,000
24 9,000
31 50,000
Feb. 13 16,000
28 (15,000)
Mar. 14 $ 68,000
Apr. 22 34,000
June 15 600,000
Sept. 29 600,000
Oct. 1 0000 000 $84,000 000000000
$500,000 $84,000 $1,302,000
(c) Land is not depreciated, so no depreciation is calculated on this asset.
The building and land improvements would be depreciated once the asset is available
for use. The building would start being depreciated when construction is completed.
This may not necessarily correspond with the dates the bills are received. Both the
building and the land improvements would be depreciated starting on October 1, if
depreciation is calculated to the nearest month.

PROBLEM 9-3B
(a) Cost:
Cash price $187,800

Delivery costs 1,200
Installation and testing 7,000
Total cost $196,000
The one-year insurance policy is not included as it benefits only the current period. It
would be recorded as Prepaid Insurance and allocated to Insurance Expense throughout
the period.
(b) Straight-line depreciation expense (per year)

$196,000
= $49,000
4

Year Cost × Rate 2 = Expense Depreciation Amount
$196,000
1
2015 $196,000 25% × 3/12 $12,250 $ 12,250 183,750
2016 0,196,000 25% 49,000 61,250 134,750
2017 0, 196,000 25% 49,000 110,250 85,750
2018 196,000 25% 49,000 159,250 36,750
2019 196,000 25% × 9/12 36,750 196,000 0
1
$196,000 cost – $0 residual value = $196,000
2
1 ÷ 4 years = 25%

(b) (Continued)

Opening
$196,000
2015 $196,000 50% × 3/12 $ 24,500 $ 24,500 171,500
2016 171,500 50% 85,750 110,250 85,750
2017 85,750 50% 42,875 153,125 42,875
2018 42,875 50% 21,438 174,563 21,437
2019 21,437 50% × 9/12 21,4372 196,000 0
1
Double diminishing-balance depreciation rate = 1 ÷ 4 = 25% × 2 = 50%
2
Depreciation expense in 2019 is calculated to equal $8,039 ($21,437 × 50% × 9/12).
However, this amount must be adjusted to $21,437 to make the carrying amount at the end
of 2019 nil, or equal to the residual value.

Units-of- Depreciation Depreciation Accumulated Carrying
Year Production × Rate 1 = Expense Depreciation Amount
$196,000
2015 2,500 $4.90 $12,250 $ 12,250 183,750
2016 10,300 ……4.90 50,470 62,720 133,280
2017 9,900 ,,,,,,,,4.90 48,510 111,230 84,770
2018 8,800 ,,,,,,,,4.90 43,120 154,350 41,650
2019 8,500 4.90 41,650 196,000 0
1
Depreciation rate (per unit):
$196,000
= $4.90
40,000
The double diminishing-balance depreciation causes profit to be lower in the early years
of the asset’s life because the depreciation expense is higher in 2016 and 2017 than
under the other two methods.

(c) Yes, there would be an impact. The cost to recycle the machine at the end of its useful
life would need to be estimated. The estimated cost would then be added to the cost of
the machine and allocated over its useful life, increasing the depreciation charge.

PROBLEM 9-4B
(a) (1)

Depreciable Depreciation # of Depreciation Accumulated Carrying
2
Year Cost Rate Mos. Expense Depreciation Amount
2015 $300,0001 25% 1/12 $ 6,250 $ 6,250 $323,750

2016 300,000 25% 12/12 75,000 81,250 248,750
2017 300,000 25% 12/12 75,000 156,250 173,750
2018 300,000 25% 12/12 75,000 231,250 98,750
2019 300,000 25% 11/12 68,750 300,000 30,000
1
$330,000 – $30,000 = $300,000
2
1 ÷ 4 years = 25%
(2)
DOUBLE DIMINISHING-BALANCE DEPRECIATION

Carrying
Amount Depreciation # of Depr. Acc. Carrying
Year Beg. of Yr Rate 1 mos Expense Depre. Amount
2015 $330,000 50% 1/12 $ 13,750 $ 13,750 $316,250

2016 316,250 50% 12/12 158,125 171,875 158,125
2017 158,125 50% 12/12 79,063 250,938 79,062
2018 79,062 50% 12/12 39,531 290,469 39,531
2019 39,531 50% 11/12 9,5312 300,000 30,000
1
1 ÷ 4 years × 2 = 25% × 2 = 50%
2
Adjusted so that the carrying amount at the end of the useful life equals $30,000 ($39,531 ×
50% × 11/12 = $18,118 was not used as it would make carrying amount lower than residual
value; $39,531 – $30,000 = $9,531).

(a) (Continued)
(3)

Units-of- Depreciable Depreciation Accumulated Carrying
Year Production × Cost/Unit 1 = Expense Depreciation Amount
2015 15,000 $0.50 $ 7,500 $ 7,500 $322,500

2016 200,000 0.50 100,000 107,500 222,500
2017 125,000 0.50 62,500 170,000 160,000
2018 190,000 0.50 95,000 265,000 65,000
2019 70,000 0.50 35,000 300,000 30,000
1
Depreciable cost per unit = ($330,000 – $30,000) ÷ 600,000 km = $0.50 per
kilometre
(b) Total depreciation:

-Line Balance Production
Depreciation expense $300,000 $300,000 $300,000
Accumulated depreciation 300,000 300,000 300,000
(c) Depreciation is a non-cash expense so the cash flows are not affected over the three-
year period.
(d) I would recommend the units-of-production method as it best reflects the pattern of the
economic benefits produced by the bus given the variability of usage each year.

PROBLEM 9-5B
(a) Equipment
Cost, January 1, 2013 $60,000
Less: Residual value 4,500
Depreciable cost 55,500
Useful life in years ÷ 5
Annual depreciation ($55,500 ÷ 5) $11,100
The equipment’s accumulated depreciation on January 1, 2015 will be $22,200

($11,100 × 2 years) and the carrying amount will be $37,800 ($60,000 – $22,200).
(b) I would expect the depreciation expense to decrease in 2015 after the change in
useful life because the depreciable cost will be expensed over a longer period of time.
(c) The change in the useful life should only affect current and future periods. This is
because the original estimate was based on information known at the time the asset
was purchased. The revision is based on new information and should only affect future
periods. In addition, if prior periods where regularly restated, users would have less
confidence in the financial statements.
(d) If they had not revised the remaining useful life, the total depreciation expense over
the equipment’s life would be the depreciable cost of $55,500. The accumulated
depreciation at the end of the equipment’s useful life would be $55,500 and the
carrying amount would be $4,500.
(e) The total depreciation expense would not change after the useful life has been
revised. There would be no changes to the accumulated depreciation or the carrying
amount at the end of the equipment’s useful life.

PROBLEM 9-6B
(a) 2013
Jan. 1 Equipment............................................................ 170,000
Accounts Payable ........................................ 170,000
(b) DIMINISHING–BALANCE DEPRECIATION

Opening
Year Amount × Rate 1 Expense Depreciation Amount
2013 $170,000 20% × 9/12 $ 25,500 $25,500 $144,500

2014 , 144,500 20% 28,900 54,400 115,600
June/15 115,600 20% × 8/12 15,413 69,813 100,187
1
1 ÷ 5 years = 20%
2013
2014
(c) 2015
(1, 2, 3)
June 1 Depreciation Expense .......................................... 15,413
(1) June 1 Cash ................................................................... 105,000

Accumulated Depreciation—Equipment ............. 69,813
Equipment .................................................. 170,000
Gain on Disposal ........................................ 4,813
Cash proceeds ................................................... $105,000

Carrying amount ................................................. 100,187
Gain on disposal................................................. $ 4,813


(c) (Continued)
(2) June 1 Cash ................................................................... 80,000

Loss on Disposal ................................................. 20,187
Equipment .................................................. 170,000
Cash proceeds ................................................... $ 80,000

Carrying amount ................................................. 100,187
Loss on disposal................................................. $(20,187)
(3) June 1 Accumulated Depreciation—Equipment .............. 69,813

Loss on Disposal ................................................. 100,187
Equipment .................................................. 170,000
Cash proceeds ................................................... $ 0

Carrying amount ................................................. 100,187
Loss on disposal................................................. $(100,187)

PROBLEM 9-7B
(a)
(1) Straight-line
Depreciation Expense =
($50,000 – $10,000)
= $13,333
3
2015
Feb. 1 Equipment............................................................... 50,000
Cash ................................................................. 50,000
Dec. 31 Depreciation Expense ............................................. 12,222

Accumulated Depreciation—Equipment ........... 12,222
($13,333 × 11/12 = $12,222)
2016
Oct. 31 Depreciation Expense ............................................. 11,111
($13,333 × 10/12 = $11,111)
31 Cash ....................................................................... 12,000

($12,222 + $11,111) ............................................... 23,333
Loss on Disposal..................................................... 14,667
Equipment............................................................... 50,000
(2) Single diminishing-balance
Depreciation rate = 1/3 × 1 = 33% (note textbook convention to round rates to two
decimal spots 0.33 or 33%)
2015
Feb. 1 Equipment............................................................... 50,000
Cash ................................................................. 50,000

($50,000 × 33% × 11/12 = $15,125)

(a) (Continued)
2016
[($50,000 – $15,125) × 33% × 10/12 = $9,591]
31 Cash ..................................................................... 12,000

($15,125 + $9,591) ................................................. 24,716
Loss on Disposal .................................................... 13,284
Equipment ........................................................ 50,000
(3) Units-of-Production
Depreciable cost per unit =
($50,000 – $10,000)
= $4.00
10,000
2015
Feb. 1 Equipment............................................................... 50,000
Cash ................................................................. 50,000

(4,000 × $4 = $16,000)
2016
(5,000 × $4 = $20,000)
31 Cash ....................................................................... 12,000

($16,000 + $20,000) ............................................... 36,000
Loss on Disposal .................................................... 2,000
Equipment........................................................... 50,000

(b)

-Line -Balance Production
Depreciation expense
2015 $12,222 $15,125 $16,000
2016 11,111 9,591 20,000
Total depreciation
for two years 23,333 24,716 36,000
+ Loss (or – gain) on disposal 14,667 13,284 2,000
= Net expense for two years $38,000 $38,000 $38,000

PROBLEM 9-8B
(a) April 1 Land .................................................................... 3,800,000
Cash ........................................................... 950,000
Mortgage Payable ....................................... 2,850,000
May 1 Depreciation Expense .......................................... 50,000

($1,500,000 ÷ 10 × 4/12 = $50,000)
1 Cash .................................................................... 700,000

Loss on Disposal ................................................. 150,000
Equipment.................................................... 1,500,000
Cash proceeds $ 700,000

Cost $1,500,000
Accumulated depreciation—equipment
[($1,500,000 ÷ 10) × 4 + $50,000)] 650,000
June 1 Cash ............................................................... 760,000

Notes Receivable ............................................ 1,640,000
Land ........................................................ 600,000
Gain on Disposal .................................... 1,800,000
July 1 Equipment....................................................... 2,000,000

Accounts Payable ................................... 2,000,000
Sept. 2 Accounts Payable ........................................... 2,000,000

Cash ....................................................... 2,000,000
Dec. 31 Depreciation Expense ..................................... 94,000

Accumulated Depreciation—Equipment . 94,000
($940,000 ÷ 10 = $94,000)
31 Accumulated Depreciation—Equipment ......... 940,000

Equipment............................................... 940,000
31 Impairment Loss ............................................. 200,000

Land ........................................................ 200,000
($11,200,000 – $11,000,000 = $200,000)

(b) Dec. 31 Depreciation Expense ....................................... 1,425,000

Accumulated Depreciation—Buildings ...... 1,425,000
($57,000,000 ÷ 40 = $1,425,000)
31 Depreciation Expense ....................................... 9,456,000

Accumulated Depreciation—Equipment ... 9,456,000
$93,560,000* ÷ 10 $9,356,000
$2,000,000 ÷ 10 × 6/12 100,000
$9,456,000
*$96,000,000 – $1,500,000 – $940,000 = $93,560,000
31 Interest Expense ............................................... 128,250

Interest Payable ........................................ 128,250
($2,850,000 × 6% × 9/12 = $64,125)
31 Interest Receivable ........................................... 57,400

Interest Revenue ...................................... 57,400
($1,640,000 × 6% × 7/12 = $57,400)
(c) HAMMERSMITH LIMITED

December 31, 2015
Property, plant, and equipment*

Land .................................................................. $11,000,000
Buildings............................................................ $57,000,000
Equipment ......................................................... $95,560,000
Total property, plant, and equipment .......... $99,925,000
*See T accounts on the following page.


(c) (Continued)
Land
Jan. 1, 2015 8,000,000 June 1, 2015 600,000

April 1, 2015 3,800,000 Dec. 31, 2015 200,000
Dec. 31, 2015 Bal. 11,000,000
Buildings
Jan. 1, 2015 57,000,000
Dec. 31, 2015 Bal. 57,000,000
Equipment
Jan. 1, 2015 96,000,000 May 1, 2015 1,500,000

July 1, 2015 2,000,000 Dec. 31, 2015 940,000
Dec. 31, 2015 Bal. 95,560,000
Accumulated Depreciation—Buildings
Jan. 1, 2015 24,200,000

Dec. 31, 2015 1,425,000
Dec. 31, 2015 Bal. 25,625,000
May 1, 2015 650,000 Jan. 1, 2015 30,000,000

Dec. 31, 2015 940,000 May 1, 2015 50,000
Dec. 31, 2015 94,000
Dec. 31, 2015 9,456,000
Dec. 31, 2015 Bal. 38,010,000

PROBLEM 9-9B
(a) (b) (c) (d)
1. yes Goodwill not amortized N/A
2. no N/A N/A Assets under Finance Leases,

Statement of Financial Position,
Property, plant and equipment
3. yes Software amortized N/A

5. no N/A N/A Professional Fees Expense,
Income Statement, Operating
expenses
6. no N/A N/A Not recorded or reported
7. no N/A N/A Rent Expense, Income


10. no N/A N/A Research Expenses, Income

PROBLEM 9-10B
(a) Jan. 1 Patents.................................................................... 22,500

Cash ................................................................. 22,500
July 1 Research Expenses ................................................ 220,000

Cash ................................................................. 220,000
1 Development Costs................................................. 60,000

Cash ................................................................. 60,000
Sept. 1 Advertising Expense ............................................... 11,000

Cash ................................................................. 11,000
Oct. 1 Copyrights............................................................... 16,000

Cash ................................................................. 16,000
Dec. 31 Impairment Loss ($175,000 – $210,000) ................ 35,000

Goodwill ........................................................... 35,000
(b) Dec. 31 Amortization Expense (given) ................................. 9,812

Accumulated Amortization—Patents ................ 9,812

Accumulated Amortization—Development Costs 1,500
($60,000 ÷ 20 × 6/12 = $1,500)

($48,000 ÷ 10 = $4,800)
31 Amortization Expense ............................................. 800

Accumulated Amortization—Copyrights ........... 800
($16,000 ÷ 5 × 3/12 = $800)

(c)
IP CORP.
Statement of Financial Position (partial)
December 31, 2015
Intangible assets
Finite life intangible assets

Patents ................................................................ $92,5001
Copyrights ........................................................... $64,0003
Development costs .............................................. $60,000
Goodwill ....................................................................... 175,0005
Total intangible assets ......................................... $331,788
1
Patents: $70,000 + $22,500 = $92,500
2
Accumulated amortization: $14,000 + $9,812 = $23,812
3
Copyrights: $48,000 + $16,000 = $64,000
4
Accumulated amortization
Copyright (original): $28,800 + $4,800 = $33,600
Copyright (additional): 800
$34,400
5
Goodwill: $210,000 – $35,000 = $175,000

PROBLEM 9-11B
(a) (in millions) Le Château ................................. Reitmans
$(2.4) $47.5
Profit margin = (0.8)% = 4.7%
$302.7 $1,019.4
$ 302.7 $ 1,019.4
$233.8 + $246.1 $633.9 + $659.4
Asset turnover � � � �
2 2
$(2.4) $47.5
$233.8 + $246.1 $633.9 + $659.4
Return on assets � � � �
2 2
= (1.0)% = 7.3%
(b) Based on the profit margin we can see that Reitmans is more profitable than Le
Château. Both companies have profit margins that are lower than the average company
in the industry (6.0%).
The asset turnover measures how efficiently a company uses its assets to generate
sales. It shows the dollars of sales generated by each dollar invested in assets.
Reitmans’ asset turnover ratio is higher than Le Château’s and yet both are lower than
the average company in the industry (2 times).
The return on assets ratio indicates that Reitmans is generating a higher return than Le
Château based on the amount of assets invested in the business. Based on the industry
average of 12.0%, both companies are performing worse than the industry average.
(c) Some additional information about long-lived assets which would assist in the
comparisons would include: the accounting policies chosen concerning the calculation
of depreciation and amortization, the estimates arrived at for the useful lives and
residual values of the assets being depreciated and finally, details concerning the costs
and accumulated depreciation or amortization recorded to date. The latter information
would provide a give an idea of the age of the long-lived assets.

PROBLEM 9-12B
(a) (in thousands) NAL ...........................................BRI
$220 $250
Profit margin 2015 = 8.8% = 13.9%
$2,500 $1,800
$150 $150
Profit margin 2014 = 10.0% = 10.0%
$1,500 $1,500
$2,500 $1,800
$2,500 + $1,100 $1,100 + $1,050
2 2
$1,500 $1,500
$1,100 + $1,000 $1,050 + $1,000
2 2
$220 $250
$2,500 + $1,100 $1,100 + $1,050
2 2
= 12.2% = 23.3%
$150 $150
$1,100 + $1,000 $1,050 + $1,000
2 2
= 14.3% = 14.6%
(b) Brew Right increased its profit margin from 10.0% to 13.9% and its asset turnover from
1.5 times to 1.7 times. The increases in these two ratios multiplied to generate a
substantial increase in Brew Right’s return on assets from 14.6% to 23.3% (return on
assets = profit margin × asset turnover).
Northern Ale suffered a decrease in its profit margin from 10.0% to 8.8%. The
company’s asset turnover remained the same during this time period at 1.4 times.
Combining the two ratios resulted in a decrease in the return on assets.


(c) Brew Right has been more successful in executing its strategy. Its strategy of cutting
costs has allowed it to boost its profit margin while simultaneously increasing its sales
volume. The volume in sales was proportionately higher than the increase in assets
over the two year period and resulted in an increase in the asset turnover. Streamlining
operations has resulted in more efficient use of assets and a higher return on assets.
Northern Ale’s strategy of expansion has resulted in a larger asset base. While its sales
volume did increase from 2014 to 2015 the profit per dollar of sale decreased, as
evidenced by the decrease in profit margin. It appears to be accepting a higher volume
of sales to the detriment of profit margin. While the company maintained its asset
turnover due to the increase in sales volume, the decrease in profit margin resulted in a
decrease in the return on assets. Given the company’s lower return on assets ratio, this
strategy does not appear to be successful.

BYP 9-1 FINANCIAL REPORTING
($ in thousands)
(a) From note 3 (l) (iii) to the financial statements, we find that Shoppers Drug Mart uses a
straight-line method of depreciating its property and equipment.
(b)
(1) (2) (3) (4)
Accumulated Impairment Carrying
Cost Depreciation Losses Amount
December 29, 2012
Properties under Development $ 60,894 $ 60,894
Land 69,605 69,605
Buildings 233,535 $ 32,742 200,793
Equipment, Fixtures and
Computer Equipment 1,319,002 872,160 $12,310 434,532
Leasehold Improvements 1,355,590 504,057 10,890 840,643
Assets under Finance Leases 134,705 23,179 00 0000 111,526
$3,173,331 $1,432,138 $23,200 $1,717,993
December 31, 2011

Properties under Development $ 71,342 $ 71,342
Land 65,478 65,478
Buildings 214,043 $ 24,325 189,718
Equipment, Fixtures and
Computer Equipment 1,283,062 776,387 $16,257 490,418
Leasehold Improvements 1,291,445 436,016 15,465 839,964
Assets under Finance Leases 127,034 16,411 00 0000 __110,623

$3,052,404 $1,253,139 $31,722 $1,767,543
(c) Net change in accumulated depreciation $178,999

Depreciation recorded in 2012 (note 13 & 15) 263,134
Difference for disposals, transfers
and retirements (note 15) $ 84,135
(d) Shoppers has a balance of Goodwill at December 29, 2012 of $2,572,707,000.
(e) Shoppers’ intangible assets include: prescription files, customer relationships,

computer software and computer software under development. There were no
impairments recorded in the year ending December 29, 2012 for intangible assets.

BYP 9-2 COMPARATIVE ANALYSIS
(a)
Ratios Shoppers ($ in thousands) Jean Coutu ($ in millions)
1. Profit $608,481 $558.4

= 5.6% = 22.6%
margin $10,781,848 $2,468.0
2. Return $608,481 $558.4

= 8.2% = 45.3%
on assets ($7,473,721 + $7,300,310) ($1,392.7 + $1,072.8)
2 2
3. Asset $10,781,848 $2,468.0

= 1.5 = 2.0
turnover ($7,473,721 + $7,300,310) times ($1,392.7 + $1,072.8) times
2 2
(b)
Ratio Shoppers Jean Coutu Industry
Profit margin 5.6% 22.6% 2.6%
Return on assets 8.2% 45.3% 5.4%
Asset turnover 1.5 times 2.0 times 2.1 times
Based on profit margin we can see that Jean Coutu is more profitable than Shoppers.
Jean Coutu’s profit margin is significantly above the industry average of 2.6%, which
indicates that it is much more profitable than the average company in the industry.
The return on assets ratio indicates that Shoppers is generating a much lower return
than Jean Coutu based on the amount of assets invested in the business. However,
again, based on the industry average of 5.4% both Shoppers and Jean Coutu are
generating a significantly better return on their assets than most other companies in the
industry.
The asset turnover measures how efficiently a company uses its assets to generate
sales. It shows the dollars of sales generated by each dollar invested in assets. Jean
Coutu’s asset turnover was higher than Shoppers and is slightly lower than the industry
average.

BYP 9-3 COMPARING IFRS AND ASPE
(a) Rosewood follows IFRS, which allows companies to reverse impairment losses. This
means it would record the following entry and adjust the carrying amount of the
buildings from $5,000,000 to $5,800,000:
Resort Property ................................................................. 800,000

Impairment Loss ....................................................... 800,000
(b) Blaze Mountain Resort follows ASPE, which does not allow companies to reverse
impairment losses. Therefore, no adjustment is required for Blaze Mountain.
(c) Before considering any adjustments for impairment loss reversals, a preliminary
calculation of profit margin and return on assets is as follows:
Rosewood Blaze Mountain

(without impairment reversal) (without impairment reversal)
1. Profit Margin $180,000 ÷ $2,250,000 = 8.0% $200,000 ÷ $2,500,000 = 8.0%

2. Asset $2,250,000 ÷ $9,000,000 = 0.2 $2,500,000 ÷ $10,000,000 = 0.2
Turnover times times
3. Return on
$180,000 ÷ $9,000,000 = 2.0% $200,000 ÷ $10,000,000 = 2.0%
Assets
If we take into consideration the adjustment Rosewood made above to reverse the
impairment loss, profit would now go up by $800,000 to $980,000 while average
assets would go up by $400,000 ($800,000 ÷ 2). We are dividing this last term by
two because the denominator pertains to average assets not assets at the end of the
year. The adjusted ratios for Rosewood are as follows:
Rosewood Blaze Mountain

(with impairment reversal) (without impairment reversal)
1. Profit Margin $980,000 ÷ $2,250,000 = 43.6% $200,000 ÷ $2,500,000 = 8.0%

2. Asset $2,250,000 ÷ $9,400,000 = 0.2 $2,500,000 ÷ $10,000,000 = 0.2
Turnover times times
3. Return on
$980,000 ÷ $9,400,000 = 10.4% $200,000 ÷ $10,000,000 = 2.0%
Assets

BYP 9-3 (Continued)

(d) When looking at the profit margin and return on assets, it appears that Rosewood is
performing better. However, that preliminary analysis does not account for the fact
that the companies are using different accounting standards. One needs to be
cautious when comparing companies that follow different standards. Different
accounting policies can make direct comparability difficult. Generally, if you are
comparing financial statements of companies that do not follow the same standards,
you would make adjustments so that the financial statements are comparable.
(e) Examples of additional information that would help assess the nature and
performance of long-lived assets would include:
• Specific ratios adjusted to remove accounting standard differences.

• The hotel star rating of the resorts to help assess the quality and popularity of the
resorts (this will help you assess future cash-flows and potential impairment).
• Budgets and forecasts along with details on room occupancy rates would also
help assess future cash flows.
• The condition and age of the buildings.
• Whether significant renovations or other large expenses are expected in the near
future.

BYP 9-4 CRITICAL THINKING
Note to instructors: All of the material supplementing this group activity, including a
suggested solution, can be found in the Collaborative Learning section of the Instructor
Resource site accompanying this textbook as well as in the Prepare and Present section of
WileyPLUS.
(a) Land – no depreciation is recorded on this asset because its useful life is infinite and
the cost cannot be allocated over the useful life.
Buildings – as usage of buildings is uniform over their useful life, the straight-line
method would be appropriate in this case.
Drilling rigs – since the use of these rigs is seasonal in nature, it would make sense to
use the units of production method for these assets so that depreciation would be
higher during periods of time when the rigs are being used the most and lower in
periods of time when the rigs are not used as much.
Furniture – as usage of these assets is uniform over useful life, the straight-line
method would be the most appropriate method for furniture.
(b) Intangible assets with definite lives should be amortized. Amortization is typically
recorded using the straight-line method and is recorded over the lesser of the
intangible’s legal life or useful life. In this case a patent has a 20 year legal life but the
useful life of the patent is likely to be five years given the length of the sales contract
with the drill bit manufacturer.
(c) If the company is planning to have its shares trade on a public stock exchange, it must
prepare its financial statements under IFRS.
(d) When a bank lends money to a company, the bank wants security or collateral for its
loan. The best collateral includes assets that can retain their value over time and are
not easily moved in order to prevent the possibility of seizure by the bank if the
company defaulted on its loan payments. Therefore the bank would want to use land
and buildings for collateral. The bank would be least likely to use an intangible asset
because it is difficult to determine its value and this value could fall rapidly over time.
Furniture is unlikely to serve as collateral because it can be moved and would be hard
for the bank to seize such an asset. In addition, furniture has little value on resale.
(e) If a 15 year lease was entered into, it would be considered a finance lease rather than
an operating lease because a significant portion of the asset’s benefits would be
controlled by the company due to the long term nature of the lease. Because of this,
the leased rig would meet the definition of an asset and would be recorded as such by
the company. An offsetting liability (lease obligation) would also be recorded. This
would be similar to buying a rig on credit.

BYP 9-4 (Continued)

(f) The asset turnover ratio is calculated by dividing sales revenue by average total
assets. Next year, the numerator is not expected to change. If the company is not
planning to purchase any new rigs or other assets, because these assets are
depreciated each year, their carrying amounts will fall and consequently, the
denominator of this ratio will decline while the numerator remains constant. Therefore
the asset turnover ratio will rise. Normally an increase in this ratio would lead one to
conclude that the company is generating more revenues with its assets, but in this
case the increase simply means that the company has decided not to replace some of
its aging assets.

BYP 9-5 ETHICS CASE
(a) The stakeholders in this situation are:

Benny Benson, president of Imporia Container Ltd.
Yeoh Siew Hoon, controller.
The shareholders and creditors of Imporia Container Ltd.
Potential investors and creditors in Imporia Container Ltd.
(b) Profit before income tax in 2015 (the year of change) will increase by implementing the
president’s proposed changes because increasing the useful life and residual value
will decrease the depreciation expense. The change will not affect profit for 2014.
(c) The proposed changes in useful life and residual value, will increase the profit margin
because the depreciation expense has been reduced, causing the increased profit.
The proposed change will also cause an overstatement of the average assets without
changing net sales. An increase in average assets decreases the asset turnover.
(d) The intentional misstatement of the life and residual value of an asset is unethical for
whatever the reason and would represent an attempt at profit manipulation. There is
nothing unethical about changing the estimate either of the life of an asset or of an
asset’s residual value if the change is an attempt to better reflect the pattern of
consumption of economic benefits. In this case, it appears from the controller’s
reaction that the revisions in the life and residual value are intended only to improve
profit, which would be unethical.

BYP 9-6 “ALL ABOUT YOU” ACTIVITY
(a) Option 1: $760.54 × 36 months = $27,379.44 total costs incurred

$27,379.44 – $25,000 = $2,379.44 costs of financing
(b) Option 2 (lease): $608.43 × 36 months = $21,903.48 total costs incurred
(c) Option 2 (purchase): $21,903.48 (from (b) above) + $7,500 = $29,403.48 total costs
incurred. You would own the three year old truck after having purchased it for $7,500.
(d) Option 2 of leasing the truck with no purchase at the end of its useful life appears, at
least initially, to be the least expensive alternative. However at the end of three years,
you do not own a truck. Option 1, purchasing the truck rather than leasing it, would
appear to be a reasonable choice as you own the truck that you can continue to use
for a number of years without making any additional loan payments beyond the three
year loan period.

BYP 9-7 SERIAL CASE
(a) The following costs should be capitalized:
Purchase price of 2 ovens $30,000

Purchase price of new refrigerator 8,500
Plumbing upgrade 1,750
Electrical upgrade 2,450
Shipping ($500 × 3) 1,500
Total costs to be capitalized $44,200
The additional insurance and painting of the walls should be expensed during the year.
(b) Sep. 1 Depreciation Expense ..................................... 167

Accumulated Depreciation—Equipment. 167
($5,000 ÷ 5 × 2/12 = $167)
1 Accumulated Depreciation—Equipment. ........ 3,667

Loss on Disposal ............................................ 1,333
Equipment............................................... 5,000
Accumulated depreciation—equipment: [($5,000 ÷ 5) × 3.5] + $167 = $3,667
(c) Sept. 1 Equipment....................................................... 44,200

Prepaid Insurance ........................................... 1,200
Repair and Maintenance Expense .................. 3,850
Cash ....................................................... 49,250

COMPREHENSIVE CASE: CHAPTERS 3 – 9
(b)
Date Account Titles Debit Credit
Aug. 1 Office Expense ............................................................... 20,000

Rent Expense ................................................................. 3,600
Cash .................................................................... 23,600
2 Notes Receivable ........................................................... 100,000

Accounts Receivable ........................................... 100,000
3 Accounts Receivable ...................................................... 500,000

Sales .................................................................... 500,000
3 Cost of Goods Sold ........................................................ 270,000

Merchandise Inventory......................................... 270,000
8 Allowance for Doubtful Accounts .................................... 70,000

9 Cash ............................................................................... 294,000

Sales Discounts ($300,000 × 2%) .................................. 6,000
10 Cash ............................................................................... 6,000

Accumulated Depreciation—Equipment ......................... 36,169
Loss on Disposal ............................................................ 1,831
Equipment............................................................ 44,000
14 Income Tax Expense ...................................................... 10,000

Cash .................................................................... 10,000
21 Patents ........................................................................... 24,000

Cash .................................................................... 24,000
31 Cash ............................................................................... 75,000

Sales .................................................................... 75,000
31 Cost of Goods Sold ........................................................ 35,000

Merchandise Inventory......................................... 35,000

COMPREHENSIVE CASE: CHAPTERS 3–9 (Continued)

(b) (Continued)
Date Account Titles Debit Credit
Aug. 31 Interest Expense............................................................. 1,500

Bank Charges Expense .................................................. 1,130
Cash .................................................................... 2,630
31 Bad Debts Expense ........................................................ 90,000

Allowance for Doubtful Accounts ......................... 90,000
[$320,000 – ($300,000 – $70,000) = $90,000]
31 Depreciation Expense .................................................... 3,125

($150,000 ÷ 4 × 1/12 = $3,125)
31 Salaries Expense............................................................ 100,000

Cash .................................................................... 100,000
31 Interest Receivable ......................................................... 667

Interest Revenue ($100,000 × 8% × 1/12) ........... 667
31 Amortization Expense ..................................................... 400

Accumulated Amortization—Patents.................... 400
($24,000 ÷ 5 × 1/12 = $400)


(a) and (c)
Cash
July 31, 2015 170,000 Aug. 1 23,600
Aug. 9 294,000 14 10,000
10 6,000 21 24,000
31 75,000 31 2,630
31 100,000
Aug. 31 Bal. 384,770
Accounts Receivable
July 31, 2015 2,700,000 Aug. 2 100,000
Aug. 3 500,000 8 70,000
9 300,000
Aug. 31 Bal. 2,730,000
Allowance for Doubtful Accounts

Aug. 8 70,000 July 31, 2015 300,000
Aug. 31 90,000
Aug. 31 Bal. 320,000
Interest Receivable
Aug. 31 667
Aug. 31 Bal. 667
Notes Receivable
Aug. 2 100,000
Aug. 31 Bal. 100,000


(a) and (c) (Continued)
Merchandise Inventory
July 31, 2015 500,000 Aug. 3 270,000
31 35,000
Aug. 31 Bal. 195,000
Equipment
July 31, 2015 194,000 Aug. 10 44,000
Aug. 31 Bal. 150,000
Aug. 10 36,169 July 31, 2015 73,669
31 3,125
Aug. 31 Bal. 40,625
Patents
Aug. 21, 2015 24,000
Aug. 31 Bal. 24,000
Accumulated Amortization—Patents
Aug. 31 400
Aug. 31 Bal. 400


Accounts Payable
July 31, 2015 1,009,000
Aug. 31 Bal. 1,009,000
July 31, 2012 260,000
Bank Loan Payable
July 31, 2015 350,000
Aug. 31 Bal. 350,000
Common Shares
July 31, 2015 300,000
Aug. 31 Bal. 300,000
Retained Earnings
July 31, 2015 1,531,331
Aug. 31 Bal. 1,531,331
Sales
Aug. 3 500,000
31 75,000
Aug. 31 Bal. 575,000


Sales Discounts
Aug. 9 6,000
Aug. 31 Bal. 6,000
Interest Revenue
Aug. 31 667
Aug. 31 Bal. 667
Cost of Goods Sold

Aug. 3 270,000
Aug. 31 35,000
Aug. 31 Bal. 305,000
Depreciation Expense
Aug. 31 3,125
Aug. 31 Bal. 3,125
Amortization Expense
Aug. 31 400
Aug. 31 Bal. 400
Salaries Expense
Aug. 31 100,000
Aug. 31 Bal. 100,000


Bad Debts Expense

Aug. 31 90,000
Aug. 31 Bal. 90,000
Office Expense
Aug. 1 20,000
Aug. 31 Bal. 20,000
Rent Expense
Aug. 1 3,600
Aug. 31 Bal. 3,600
Bank Charges Expense

Aug. 31 1,130
Aug. 31 Bal. 1,130
Interest Expense
Aug. 31 1,500
Aug. 31 Bal. 1,500
Loss on Disposal
Aug. 10 1,831
Aug. 31 Bal. 1,831
Income Tax Expense

Aug. 14 10,000
Aug. 31 Bal. 10,000


(d)
CLEAR IMAGES LTD.
Trial Balance
August 31, 2015
Debit Credit
Cash $ 384,770
Accounts receivable 2,730,000
Allowance for doubtful accounts $ 320,000
Notes receivable 100,000
Interest receivable 667
Merchandise inventory 195,000
Equipment 150,000
Accumulated depreciation—equipment 40,625
Patents 24,000
Accumulated amortization—patents 400
Accounts payable 1,009,000
Bank loan payable 350,000
Common shares 300,000
Retained earnings 1,531,331
Sales 575,000
Sales discounts 6,000
Interest revenue 667
Cost of goods sold 305,000
Depreciation expense 3,125
Amortization expense 400
Salaries expense 100,000
Bad debts expense 90,000
Office expense 20,000
Rent expense 3,600
Bank charges expense 1,130
Interest expense 1,500
Loss on disposal 1,831
Income tax expense 10,000 000000000
$4,127,023 $4,127,023


(e) (1)
CLEAR IMAGES LTD.
Income Statement
Month Ended August 31, 2015
Sales $575,000
Less: Sales discounts 6,000 $569,000
Cost of goods sold 305,000
Gross profit 264,000
Operating expenses
Salaries expense $100,000
Bad debts expense 90,000
Office expense 20,000
Rent expense 3,600
Bank charges expense 1,130
Depreciation expense 3,125
Amortization expense 400
Loss on disposal 1,831
Total operating expenses 220,086
Profit from operations 43,914
Other revenues and expenses
Interest revenue $ 667
Interest expense (1,500)
Total other revenues and expenses (833)
Profit before income tax 43,081
Income tax expense 10,000
Profit $ 33,081


(e) (2) (Continued)
CLEAR IMAGES LTD.
Statement of Changes in Equity
Month Ended August 31, 2015
Common Retained Total

Shares Earnings Equity
Balance, August 1 $300,000 $1,531,331 $1,831,331
Profit 0000 000 33,081 33,081
Balance, August 31 $300,000 $1,564,412 $1,864,412
(3)
CLEAR IMAGES LTD.
Statement of Financial Position
August 31, 2015
Assets
Current assets
Cash $ 384,770
Accounts receivable $2,730,000
Less: Allowance for doubtful accounts 320,000 2,410,000
Interest receivable 667
Notes receivable 100,000
Merchandise inventory 195,000
Total current assets 3,090,437
Property, plant and equipment
Equipment $150,000
Less: Accumulated depreciation 40,625 109,375
Intangible assets
Patents $24,000
Less: Accumulated amortization 400 23,600
Total assets $3,223,412
Liabilities and Shareholders’ Equity
Liabilities
Accounts payable $1,009,000
Bank loan payable 350,000
Total liabilities $1,359,000
Shareholders’ equity
Common shares $ 300,000
Retained earnings 1,564,412
Total shareholders’ equity 1,864,412
Total liabilities and shareholders’ equity $3,223,412

Legal Notice
Copyright
Copyright © 2014 by John Wiley & Sons Canada, Ltd. or related companies. All rights
reserved.
The data contained in these files are protected by copyright. This manual is furnished under
licence and may be used only in accordance with the terms of such licence.
The material provided herein may not be downloaded, reproduced, stored in a retrieval
system, modified, made available on a network, used to create derivative works, or
transmitted in any form or by any means, electronic, mechanical, photocopying, recording,
scanning, or otherwise without the prior written permission of John Wiley & Sons Canada,
Ltd.
(MMXV iv F3)


SM Chapter 09

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

SM Chapter 09

Hochgeladen von

Copyright:

Verfügbare Formate

www.downloadslide.

Reporting and Analyzing Long-Lived Assets

ASSIGNMENT CLASSIFICATION TABLE

1. Determine the cost 1, 2, 3, 4 1, 2, 3 1, 2 1A, 2A, 3A 1B, 2B, 3B 4, 6, 7

2. Explain and 5, 6, 7, 8, 4, 5, 6, 7, 2, 3, 4, 5, 6, 2A, 3A, 4A, 2B, 3B, 4B 1, 3, 4,

Solutions Manual 9-1 Chapter 9

ASSIGNMENT CHARACTERISTICS TABLE

Problem Difficulty Time

1A Classify expenditures. Moderate 15-20

2A Determine cost; record property transactions. Simple 20-30

3A Determine cost; calculate depreciation under different Moderate 30-40

4A Calculate and compare depreciation under different Moderate 40-50

5A Calculate depreciation; discuss revision of estimate. Moderate 15-20

6A Record acquisition, depreciation, and disposal of Simple 15-20

7A Record and determine effect of depreciation method Moderate 35-45

8A Record property, plant and equipment transactions; Moderate 10-15

9A Identify intangible assets and goodwill. Moderate 20-30

10A Record intangible asset transactions; prepare partial Moderate 30-40

11A Calculate and evaluate ratios. Moderate 30-40

12A Calculate and evaluate ratios. Moderate 30-40

1B Classify expenditures. Moderate 15-20

2B Determine cost; record property transactions. Simple 20-30

3B Determine cost; calculate depreciation under different Moderate 35-45

4B Calculate and compare depreciation under different Moderate 40-50

Solutions Manual 9-2 Chapter 9

ASSIGNMENT CHARACTERISTICS TABLE (Continued)

Problem Difficulty Time

5B Calculate depreciation; discuss revision of estimate. Moderate 15-20

6B Record acquisition, depreciation, and disposal of Simple 15-20

7B Record and determine effect of depreciation method Moderate 35-45

8B Record property, plant and equipment transactions; Moderate 10-15

9B Identify intangible assets and goodwill. Moderate 20-30

10B Record intangible asset transactions; prepare partial Moderate 30-40

11B Calculate and evaluate ratios. Moderate 30-40

12B Calculate and evaluate ratios. Moderate 30-40

Solutions Manual 9-3 Chapter 9

(b) An asset retirement cost is an estimate of the cost of an obligation to dismantle,

2. Two examples of operating expenditures include routine maintenance and painting of

Solutions Manual 9-4 Chapter 9

Answers to Questions (Continued)

(a) Early years

Straight-line Same each year Constant charge Increases at a Declines at a

Units-of- Varies with Impact on profit Increases at a Declines at a

Diminishing- Decreases each Increasing profit Increases at a Declines at a

(b) Total life

Solutions Manual 9-5 Chapter 9

Answers to Questions (Continued)

Solutions Manual 9-6 Chapter 9

Answers to Questions (Continued)

Solutions Manual 9-7 Chapter 9

Answers to Questions (Continued)

Solutions Manual 9-8 Chapter 9

Answers to Questions (Continued)

Solutions Manual 9-9 Chapter 9

Answers to Questions (Continued)

Solutions Manual 9-10 Chapter 9

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 9-2

BRIEF EXERCISE 9-3

BRIEF EXERCISE 9-4

Solutions Manual 9-11 Chapter 9

BRIEF EXERCISE 9-5

BRIEF EXERCISE 9-6

(a) Depreciation rate = 1 ÷ 4 = 25%