On December 31, 2013, the Mallory Corporation had the following activity in its

Question

On December 31, 2013, the Mallory Corporation had the following activity in its fixed assets record. Assume all assets were purchased on January 1. Cost Salvage Date $5,0002012 5 DDB | $50,000 Life Method of Depreciation Machine 1 5,000 Building #3 | $900,000 not including | 2004 | 25 S/L land 200000 , toms eatated Mine 316 $1,000,000 Mine 682 $500,000 $50,000 $0 tons $100,000 201140,000 6,000 barrels extracted barrels Patent Truck 1 2010 17 2010 200,000Units of production: total miles $35,000 $3,000 depreciated to date are 60,000 as of January 1, 2006. Miles this year 30,000 Truck 2 $50,000 $5,000 2009 150,000 Units of production, miles this Truck 3 $75,000 miles year are 15,000 2008 200,000 Units of production: total miles miles depreciated to date are 180,000 as of January 1, 2006. Miles in 2006 are 30,000 miles. S/L Machine 2 $100,000 $5,000 2003 10 REQUIRED: Compute the depletion, amortization, and depreciation expense on December 31, 2013 for each asset listed above. Record the entries for the assets above Suppose that we sold machine 2 for $50,000, record the entry Suppose that the building ife increased from 25 years to 30 years, revise the depreciation and prepare the entry Suppose that the corporation spent $20,000 in 2013 to defend the patent. Record the entry . .

Explanation / Answer

1. Depreciation expense is charged on tangible assets.

Amortization expense is charged on intangible assets.

Depletion expense is charged on natural resources or wasting assets.

Depreciation, Amortization and Depletion expense for the year ended December 31, 2013:

2. In the books of Mallory Corporation :

3. In the books of Mallory Corporation :

4. Till December 31, 2012, depreciation expense has been charged for 9 years.

Accumulated depreciation on building as on December 31, 2012 = $ ( 900,000 - 50,000) / 25 x 9 = $ 306,000.

Book value as on December 31, 2012 = $ 900,000 - $ 306,000 = $ 594,000.

Annual depreciation for remaining 21 years of the asset's life = $ ( 594,000 - 50,000) / 21 = $ 25,904.76

Adjusting entry:

5.

Equipment Computation Depreciation Expense Amortization Expense Depletion Expense Machine 1 $ 65,000 x 60 % x 40 % $ 15,600 Building # 3 $ ( 900,000 - 50,000) / 25 34,000 Mine 316 30,000 tons / 1,000,000 tons x $ ( 1,000,000 - 0) $ 30,000 Mine 682 $ ( 500,000 - 100,000) x 6,000 barrels / 40,000 barrels 60,000 Patent $ ( 50,000 - 0) / 17 $ 2,941 Truck 1 $ ( 35,000 - 3,000) x 30,000 miles / 200,000 miles 4,800 Truck 2 $ ( 50,000 - 5,000) x 15,000 miles / 150,000 miles 4,500 Truck 3 $ ( 75,000 - 10,000) / 20,000 miles / 200,000 miles 6,500 Machine 2 Depreciation expense charged for 10 years since 2003. Hence no further depreciation. 0 Totals $ 65,400 $ 2,941 $ 90,000

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