(Solution Manual) Accounting Principles Canadian Edition Volume 2

Weygandt,Kieso,Kimmel,Trenholm,Warren,Novak, 9

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Solution Manual

9th Edition

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Solution Manual for Accounting Principles Canadian Edition Volume 2, The downloadable file consists of 1380 pages, and the total size of the file is 5.87 MB. Purchase now only for highly discounted price.

Author(s): Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

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Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) CHAPTER 9 Long -Lived Assets Learning Objectives 1. Calculate the cost of property, plant, and equipment. 2. Apply depreciation methods to property, plant , and equipment. 3. Explain the factors that cause changes in periodic depreciation and calculate revised depreciation for property, plant , and equipment. 4. Demonstrate how to account for property, plant , and equipment disposals. 5. Record natural resource transactions and compute depletion. 6. Identify the basic accounting issues for intangible assets and goodwill. 7. Illustrate the reporting and analysis of long -lived assets. Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) Summary of Questions by Learning Objectives and Bloom’s Taxonomy Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT Questions 1. 1 K 6. 2 C 11. 3 C 16. 4 K 21. 6 C 2. 1 K 7. 2 K 12. 3 K 17. 4 C 22. 6 C 3. 1 C 8. 2 C 13. 3 C 18. 5 K 23. 7 K 4. 1 C 9. 2,3 K 14. 4 C 19. 5 C 24. 7 C 5. 1 C 10. 3 C 15. 4 C 20. 6 C Brief Exercises 1. 1 AP 6. 2 AP 11. 3 AP 16. 5 AP 21. 7 AN 2. 1 AP 7. 2 AP 12. 3 AP 17. 5,7 AP 3. 1 K 8. 2 AP 13. 4 AP 18. 6 AP 4. 1 AP 9. 2 AP 14. 4 AP 19. 6,7 AP 5. 2 AP 10. 2 AP 15. 4 AP 20 7 AP Exercises 1. 1 AP 5. 2 AP 9. 3 AP 13. 5 AP 17 2,7 AP 2. 1,2 AP 6. 2 AP 10. 3 AP 14. 1,2,6 AP 18. 7 AN 3. 1,2 C 7. 2 AP 11. 4 AP 15. 6 AP 4. 2 AP 8 3 AP 12. 4 AP 16. 6 AP Problems 1. 1 AP 4. 1,3 AP 7. 1,2,3, 4 AP 10. 2,4,7 AP 13. 3,5,7 AP 2. 1,2 AP 5. 2 AP 8. 2,4 AP 11. 6 AP 14. 7 AN 3. 1,2 AP 6. 3 AP 9. 2,4 AP 12. 6,7 AP Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) Legend : The following abbreviations will appear throughout the solutions manual file. LO Learning objective BT Bloom's Taxonomy K Knowledge C Comprehension AP Application AN Analysis S Synthesis E Evaluation Difficulty: Level of difficulty S Simple M Moderate C Complex Time: Estimated time to complete in minutes AACSB Association to Advance Collegiate Schools of Business Communication Communication Ethics Ethics Analytic Analytic Tech. Technology Diversity Diversity Reflec. Thinking Reflective Thinking CPA CM CPA Canada Competency Map Ethics Professional and Ethical Behaviour PS and DM Problem -Solving and Decision -Making Comm. Communication Self-Mgt. Self-Management Team & Lead Teamwork and Leadership Reporting Financial Reporting Stat. & Gov. Strategy and Governance Mgt. Accounting Management Accounting Audit Audit and Assurance Finance Finance Tax Taxation Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Exercises Problems Set A Problems Set B 1. Calculate the cost of property, plant, and equipment. 1, 2, 3, 4, 5 1, 2, 3, 4 1, 2, 3, 12 1, 2, 3, 4, 7 1, 2, 3, 4, 7 2. Apply depreciation methods to property, plant, and equipment . 6, 7, 8, 9, 5, 6, 7, 8, 9, 10 2, 3, 4, 5, 6, 7, 14, 17 2, 3, 5, 7, 8, 9, 10 2, 3, 5, 7, 8, 9, 10, 13 3. Explain the factors that cause changes in periodic depreciation and calculate revis ed depreciation for property, plant, and equipment . 9, 10, 11, 12, 13, 11, 12 8, 9, 10 4, 6, 7, 13 4, 6, 7 4. Demonstrate how to a ccount for property, plant, and equipment disposals . 14, 15, 16, 17, 13, 14 , 15 11, 12 7, 8, 9 , 10 7, 8, 9 , 10 5. Record natural resource transaction s and calculate depletion . 18, 19, 20 16, 17 13 13 13 6. Identify the basic accounting issues for intangible assets and goodwill. 21, 22 18, 19 14, 15, 16 11, 12 11, 12 7. Illustrate the reporting and analysis of long -lived assets. 23, 24 17, 19 , 20, 21 17, 18 10, 12, 13, 14 10, 12, 13, 14 Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Record property transactions. Simple 20-30 2A Allocate cost and calculate partial period depreciation. Moderate 20-30 3A Determine cost; calculate and compare depreciation under different methods. Moderate 30-40 4A Account for operating and capital expenditures and asset impairments. Moderate 20-30 5A Calculate and compare depreciation using three methods. Moderate 30-40 6A Record impairment and calculate revised depreciation. Moderate 20-30 7A Record acquisition, depreciation, impairment , and disposal of land and building. Moderate 25-35 8A Calculate and compare depreciation and gain or loss on disposal under three methods of depreciation. Moderate 30-40 9A Record acquisition, depreciation , and disposal of equipment. Moderate 30-40 10A Record property, plant , and equipment transactions; prepare partial financial statements. Complex 40-50 11A Correct errors in recording intangible asset transactions. Complex 15-20 12A Record intangible asset transactions; prepare partial balance sheet. Moderate 30-40 13A Record natural resource transactions; prepare partial financial statements. Moderate 25-30 14A Calculate ratios and comment. Moderate 15-25 1B Record property transactions. Simple 20-30 2B Allocate cost and calculate partial period depreciation. Moderate 20-30 3B Determine cost; calculate and compare depreciation under different methods. Moderate 30-40 4B Account for operating and capital expenditures and asset impairments. Moderate 20-30 5B Calculate and compare depreciation using three methods. Moderate 30-40 6B Record impairment and calculate revised depreciation. Moderate 20-30 Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) Problem Number Description Difficulty Level Time Allotted (min.) ASSIGNMENT CHARACTERISTICS TABLE (Continued) Problem Number Description Difficulty Level Time Allotted (min.) 7B Record acquisition, depreciation, impairment , and disposal of equipment . Moderate 25-35 8B Calculate and compare depreciation and gain or loss on disposal under three methods of depreciation . Moderate 30-40 9B Record acquisition, depreciation , and disposal of furniture. Moderate 30-40 10B Record property, plant , and equipment transactions; prepare partial financial statements. Complex 40-50 11B Correct errors in recording intangible asset transactions. Complex 15-20 12B Record intangible asset transactions; prepare partial balance sheet. Moderate 30-40 13B Record equipment , note payable , and natural resource transactions; prepare partial financial statements. Moderate 25-30 14B Calculate ratios and comment. Moderate 15-25 Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BLOOM’S TAXONOMY TABLE Correlation Chart between Bloom's Taxonomy, Study Objectives and End -of- Chapter Exercises and Problems Learning Objective Knowledge Comprehension Application Analysis Synthesis Evaluation 1. Calculate the cost of property, plant, and equipment . Q9.1 Q9.2 BE9.3 Q9.3 Q9.4 Q9.5 E9.3 BE9.1 BE9.2 BE9.4 E9.1 E9.2 E9.14 P9.1A P9.2A P9.3A P9.4A P9.7A P9.1B P9.2B P9.3B P9.4B P9.7B 2. Apply depreciation methods to property, plant, and equipment . Q9.7 Q9.9 Q9.6 Q9.8 Q9.10 Q9.11 E9.3 BE9.5 BE9.6 BE9.7 BE9.8 BE9.9 BE9.10 E9.2 E9.4 E9.5 E9.6 E9.7 E9.14 E9.17 P9.2A P9.3A P9.5A P9.7A P9.8A P9.9A P9.10A P9.2B P9.3B P9.5B P9.7B P9.8B P9.9B P9.10B P9.13B 3. Explain the factors that cause changes in periodic depreciation and calculate revised depreciation for property, plant, and equipment . Q9.9 Q9.12 Q9.10 Q9.11 Q9.13 BE9.11 BE9.12 E9.8 E9.9 E9.10 P9.4A P9.6A P9.7A P9.13A P9.4B P9.6B P9.7B 4. Demonstrate how to account for property, plant, and equipment disposals . Q9.16 Q9.14 Q9.15 Q9.17 BE9.13 BE9.14 BE9.15 E9.11 E9.12 P9.7A P9.8A P9.9A P9.10A P9.7B P9.8B P9.9B P9.10B 5. Record natural resource transactions and calculate depletion . Q9.18 Q9.19 Q9.20 BE9.16 BE9.17 E9.13 P9.13A P9.13B 6. Identify the basic accounting issues for intangible assets and goodwill . Q9.21 Q9.22 BE9.18 BE9-19 E9.14 E9.15 E9.16 P9.11A P9.12A P9.11B P9.12B Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BLOOM’S TAXONOMY TABLE (Continued) Learning Objective Knowledge Comprehension Application Analysis Synthesis Evaluation 7. Illustrate the reporting and analysis of long - lived assets. Q9.23 BE9.17 Q9.24 BE9.1 7 BE9.19 BE9.20 BE9.21 E9.17 P9.10A P9.10B P9.12A P9.13A P9.12B P9.13B E9.18 P9.14A P9.14B Broadening Your Perspective a BYP9.1 BYP 9.2 BYP9.3 BYP9.6 BYP9.4 BYP9.5 Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) ANSWERS TO QUESTIONS 1. Three characteristics of property, plant, and equipment include: t hey (1) have a physical substance (a definite size and shape), (2) are used in the operations of the business, and (3) are not intended for sale to customers. LO 1 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 2. Examples of land improvements are a road, driveway , sidewalk or parking lot on the property, fencing , or an underground sprinkler system. LO 1 BT: K Difficulty: S Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 3. The invoice cost, the cost of the safety inspection, and the cost for the logo to be paint ed on the vehicle are capitalized, as they are required costs to put the vehicle into use. The insurance costs benefit the business for the term of the policy and so the costs should be allocated to the period of benefit from the policy, typically by initial ly recording the payment as prepaid insurance and then reducin g the prepayment, charging insurance expense as the policy expires. LO 1 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 4. The purpose of depreciation is not to accumulate the cash needed to replace an asset. Rather, depreciation is a cost allocation method , which records an expense in those accounting periods where the asset has been used and has contributed to the earning of revenues. This charge also reduces the carrying amount of the asset, but it does not involve any cash. LO 1 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 5. The purchase cost must be split between the land and building because the build ing is depreciated and the land is not. In addition, the cost of each item will be needed to determine any gain or loss on disposal if either one is later sold. LO 1 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) QUESTIONS (Continued) 6. Residual value is the estimated amount that a company would obtain from disposing of a long -lived asset at the end of its useful life. Residual value is not depreciated, since the amount is expected to be recovered at the end of the asset’s useful life . Residual value is used in the formula for calculating periodic depreciation using the straight line and unit -of-production methods. Residual value is used in an indirect way in the diminishing balance method. Rather than using resid ual value to reduce the depreciable amount , as is done using the other two methods, the total amount of depreciation recorded is limited to the amount that will cause the carrying amount to equal the residual value of the asset. LO 1 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 7. The three factors that affect the calculat ion of depreciation include cost, useful life , and residual value . The cost of a depreciable asset must include all necessary costs to get the asset ready for use. The useful life is the period of time an asset is expected to be available for use . This length may be measured as a function of time or number of units of pr oduction. The residual value is the estimated amount that a company would obtain from disposing of the asset at the end of its useful life. LO 2 BT: K Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 8. The amount of annual depreciation is different over the useful life of an asset depending on which of t he three depreciation methods are being used. The straight -line method creates a constant amount of depreciation over the useful life. The diminishing -balance method is devi sed to charge a higher amount of depreciation in the earlier part of the useful life of the asset. Lastly, the unit -of-production method is less predictable in that it is based on the amount of use that is being made of the asset in each period . LO 2 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 9. A company should choose the depreciation method it believes will best reflect the pattern over which the asset’s future economic benefits are expecte d to be consumed. The depreciation method must be revised if the expected pattern of consumption of the future economic benefits has changed. LO 2,3 BT: K Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) QUESTIONS (Continued) 10. Operating expenditures are ordinary repairs made to maintain the operating efficiency and expected productive life of the asset. Because they are recurring expenditures and normally benefit only the current accounting period, they are expe nsed when incurred. Capital expenditures are additions and improvements made to increase efficiency, productivity, or expected useful life of the asset. Because they benefit future periods, capital expenditures are debited to the asset account affected. Once capitalized, these expenditures are depreciated over their benefiting period. LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 11. Revision of depreciation generally occurs when there is a change to any of the three factors that affect the calculation of depreciation: the asset ’s cost, useful life, or residual value. Depreciation needs to be revised if there are capital expenditures, impairments in the asset ’s recoverable amount, changes in the depreciation method, or changes in the estimated remaining useful life or residual value. The revisions are based on new information that will affect only current and future periods , so there is no revision of depreciation previously recorded . LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 12. Factors that may contribute to an impairment loss include obsolescence of a piece of equipment , loss of a market for a product manufactured, bankruptcy of the supplier of replacement parts for equipment, or environmental concerns causing extra costs of disposal at the end of the useful life. LO 3 BT: K Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 13. Extending the total service life and consequently the estimated remaining useful life of a depreciable asset will reduce the amount of depreciation recorded in each of the remaining five years of use. The carrying amount of the asset will become the new basis to which the business will apply the formula of the depreciation method . The residual value may also be revised. LO 3 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) QUESTIONS (Continued) 14. Depreciation must be updated from the last time depreciation entries were 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 disposal . LO 4 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 15. The asset and related accumulated depreciation should continue to be reported on the balance sheet, without further depreciation or adjustment, until the asset is retired. Reporting the asset and related accumulated depreciation on the balance sheet informs the reader of the financial statements that the asse t is still being used by the company. However, once an asset is fully depreciated, no additional depreciation should be taken on this asset, even if it is still being used. In no situation can the accumulated depreciation exceed the cost of the asset. LO 4 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 16. In a sale of property, plant, or equipment, the carrying amount of the asset is compared to the proceeds from the sale. If the proceeds of the sale exceed the carrying amo unt 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. In an exchange, a new asset is received in an exchange for the old asset given up. The gain or loss i s calculated by comparing the fair value of the asset given up to its carrying amount. The trade -in allowance on the asset given up is not relevant because it rarely reflects the fair value of the asset that is given up . Instead of using the trade -in allow ance, the fair value of the asset given up is used to calculate the gain or loss on the asset being given up. A loss results if the carrying amount of the asset being given up is more than its fair value. A gain results if the carrying amount is less than its fair value . LO 4 BT: K Difficulty: M Time: 10 min. AACSB: None CPA: cpa -t001 CM: Reporting 17. The c arrying amount of an item of property, plant, or equipment is a sub - total amount representing the net amount of the cost less the accumulated depreciation. The amount is not a general ledger account and so is not used in journal entries used to record dispositions. Instead, the asset and accumulated depreciation accounts are used in the journal entry. LO 4 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) QUESTIONS (Continued) 18. Natural resources have two characteristics that make them different from other long -lived assets: (1) they are physically extracted in operations such as mining, cutting, or pumping; an d (2) only an act of nature can replace them . Similar to property, plant, and equipment , natural resources are tangible long -lived assets that are expected to last beyond one year and are therefore classified on the balance sheet as non -current. When natural resources are extracted , depletion is recorded , causing an increase in another asset, inventory , which is subsequently sold. LO 5 BT: K Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 19. The units -of-production method is a common and ideal method of recording the depletion of natural resources. There is a finite quantity of units of natural resource to be extract ed. As extraction occurs, the conversion from one asset (natural resource) to another (inventory) can be measured in units and cost of the units can be fairly applied. Consequently , a more precise charge for dep letion can be arrived at that corresponds to the asset created (inventory) when the natural resource is reduced. LO 5 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 20. I disagree. The useful life of some intangible assets might be limited to the legal life of those assets and in that case, I would agree. I disagree with the limitation of the period of amortization to the legal life of intangibles. Some intangible assets have useful lives that are much shorter than the ir respective legal li ves. So, to proper ly match expenses to revenues , the length of useful life should be used in the calculation of amortization . In some cases, the legal life could be without time limits . In that case it would not be possible to execute a calculation. Finally, in the case of good will, GAAP dictates that no depreciation can be recorded under any circumstances. Only impairment losses reduce the carrying amount of goodwill. LO 5 BT: C Difficulty: M Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) QUESTIONS (Continued) 21. The accounting for tangible and intangible assets is much the same. Tangible and i ntangible assets are reported at cost, which includes all expenditures necessary to prepare the asset for its intended use. Both tangible and intangible ass ets with finite li ves are amortized over the ir useful life. In the case of long-lived tangible assets, the useful life or the physical life of the asset will be used as a limit of the length of time the assets will be depreciated. In the case of intangible life, there is no physical limitation in the usefulness of the asset and the length of time the asset will be amortized is the shorter of its useful life or its legal life, usually on a straight -line basis. Due to their lack of substance, intangible assets are more likely to have indefinite useful lives and not need to be amortized , but only tested for impairment . This characteristic is the main difference between the accounting of tangible and intangible as sets. LO 6 BT: C Difficulty: M Time: 10 min. AACSB: None CPA: cpa -t001 CM: Reporting 22. Goodwill is the value of many favourable attributes that are intertwined in a business enterprise. Goodwill can be identified only with the business as a whole and, unlike other assets, cannot be sold separately. Goodwill is only recorded on the purchase of a business if the purchaser pays a price that is greater than the fair value of the net assets of the business. LO 6 BT: C Difficulty: C Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting 23. Property, plant, and equipment and natural resources are often combined and reported in the balance sheet as “property, plant, and equipment” or “capital assets .” Intangible assets are listed separately after property, plant, and equipment. Goodwill must be disclosed separately. For assets that are deprecia ted or amortized, the balances of the accumulated depreciation and/or amortization must be disclosed in the balance sheet or in the notes to the financial statements. Depreciation and amortization expense for the period must also be disclosed either on the income statement , elsewhere in the financial statements , or in the notes to the financial statements. When impairment losses have occurred , they should be shown on a separate line on the income statement , with the details disclosed in a note. The notes to the financial statements should disclose the depreciation or amortization methods and rates that are used. The carrying amount of each major class of long -lived assets should also be disclosed. Companies should also disclose their impairment policy in the notes to the financial statements. LO 7 BT: K Difficulty: C Time: 10 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) QUESTIONS (Continued) 24. I disagree. Higher turnover of assets does not necessarily result in increased profits. A higher asset turnover just means that more revenue or sales are being generated for each dollar of assets. On the other hand, a higher retu rn on assets means a proportionately higher profit has been generated for each dollar of assets. LO 7 BT: C Difficulty: C Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 9.1 (a) The cost of the land is $ 95,000 ($ 85,000 + $ 1,500 + $ 5,000 + $3,500). (b) The cost of the land improvements is $ 5,000 (parking lot) . LO 1 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting BRIEF EXERCISE 9.2 The cost of the equipment is $ 42,000 (invoice price $ 40,375 + transportation $625 + installation and testing $1,000). The payment of $ 1,750 for the insurance should be recorded as prepa id insurance which will be expensed as it is consumed. LO 1 BT: AP Difficulty: S Time: 5 min. AAC SB: None CPA: cpa -t001 CM: Reporting BRIEF EXERCISE 9.3 (a) O (b) C (c) C (d) C (e) O1 (f) C (g) O (h) C (i) C (j) O 1The assumption is that the supplies are to be used in near future. Supplies are not long -lived assets. LO 1 BT: K Difficulty: M Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BRIEF EXERCISE 9.4 Jan. 2 Land [$850,000 × ($352,000 ÷ $880,000)] .... 340,000 Building [$850,000 × ($396,000 ÷ $880,000)] .... 382,500 Equipment [$850,000 × ($132,000 ÷ $880,000)] .... 127,500 Cash ................................ ................ 170,000 Mortgage Payable ($850,000 − $170,000) ................. 680,000 To record purchase of property. LO 1 BT: AP Difficulty: S Time: 10 min. AACSB: None CPA: cpa -t001 CM: Reporting BRIEF EXERCISE 9.5 Depreciable amount is $3 6,000 ($ 42,000 − $ 6,000). With a 4-year useful life, annual depreciation is $ 9,000 ($3 6,000  4). Under the straight -line method, depreciation is the same each year. Thus, depreciation expense is $ 9,000 for each year of the equipment’s life. LO 2 BT: AP Difficulty: S Time : 5 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BRIEF EXERCISE 9.6 The diminishing -balance rate is 50% (200%÷ 4 ) and this rate is applied to the carrying amount at the beginning of the year. Depreciation expense for each year is as follows: Carrying Amount End of Year Beginning Depr. Depr. Accum. Carrying Year of Year × Rate = Expense Depr. Amount 2024 $42,000 50% $21,000 $21,000 $21,000 2025 21,000 50% 10,500 31,500 10,500 2026 10,500 50% 4,500¹ 36,000 6,000 ¹ Limited to the amount that reduces the carrying amount to the residual value of $ 6,000 LO 2 BT: AP Difficulty: M Time: 10 min. AACSB: None CPA: cpa -t001 CM : Reporting BRIEF EXERCISE 9.7 The diminishing -balance rate is 30% and this rate is applied to the carrying amount at the beginning of the year. Depreciation expense for 2025 and 2026 is as follows: Carrying Amount End of Year Beginning Depr. Depr. Accum. Carrying Year of Year × Rate = Expense Depr. Amount 2025 $38,000 30% $11,400 $11,400 $26,600 2026 26,600 30% 7,980 19,380 18,62 0 LO 2 BT: AP Difficulty: M Time: 10 min. AACSB: None CPA: cpa -t001 CM : Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BRIEF EXERCISE 9. 8 a. Depreciable amount per unit: ($38,950 − $4,300 )  550,000 km. = $0.06 3/km. b. Annual depreciation expense: 2023 : 90,000 × $0.063 = $5,670 2024 : 135,000 × $0.063 = $8,505 LO 2 BT: AP Difficulty: M Time: 10 min. AACSB: None CPA: cpa -t001 CM: Reporting BRIEF EXERCISE 9.9 Depreciation expense for each year: End of Year Depreciable Depr. Depr. Accum. Carrying Year Amount1 × Rate = Expense Depr. Amount 2024 $32,000 25% × 9/12 $ 6,000 $ 6,000 $32,000 2025 32,000 25% 8,000 14,000 24,000 1Depreciable amount = $ 38,000 − $ 6,000 = $32,000 LO 2 BT: AP Difficulty: M Time: 10 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BRIEF EXERCISE 9.10 The double diminishing -balance rate is 50% (25% × 2) and this rate is applied to the carrying amount at the beginning of the year. Depreciation expense for each year is as follows: Double Diminishing -balance Carrying Amount End of Year Beginning Depr. Depr. Accum. Carrying Year of Year × Rate = Expense Depr. Amount 2024 $38,000 50% × 1/2 $ 9,500 $ 9,500 $28,500 2025 28,500 50% 14,250 23,750 14,250 2026 14,250 50% 7,125 30,875 7,125 2027 7,125 50% 1,125¹ 32,000 6,000 ¹ Limited to the amount that brings the carrying amount to the residual value of $ 6,000 LO 2 BT: AP Difficulty: M Time: 15 min. AACSB: None CPA: cpa-t001 CM: Reporting BRIEF EXERCISE 9.11 a. Annual depreciation: ($250,000 − $10,000)  6 = $40,000 Equipment cost ................................ ............... $250,000 Less accumulated depreciation ($40,000 × 3) for 2022 to 2024 ................. 120,000 Carrying amount Dec. 31, 2024 ...................... $130,000 b. Impairment Loss1 ................................ ....... 30,000 Accumulated Depreciation —Equipment 30,000 To record impairment loss. 1Carrying amount from a................................. $130,000 Less: Recoverable amount ............................ 100,000 Impairment loss ................................ ............... $ 30,000 Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BRIEF EXERCISE 9.12 Carrying amount, Jan. 1, 2024 ($32,000 − $ 9,000) ......... $23,000 Less: Residual value ................................ ....................... (2,000) Remaining depreciable amount ................................ ..... 21,000 Remaining useful life ................................ ...................... ÷ 4 years Revised annual depreciation expense 2024 .................. $ 5,250 LO 3 BT: AP Difficulty: M Time: 10 min. AACSB: None CPA: cpa -t001 CM: Reporting BRIEF EXERCISE 9.13 Accumulated Depreciation — Equipment ................................ ................... 25,700 Equipment ................................ .............. 25,700 To record retirement of equipment. LO 4 BT: AP Difficulty: S Time: 5 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BRIEF EXERCISE 9.14 a. Mar. 31 Depreciation Expense [($86,400 − $2,200) ÷ 5 × 3/12] ........ 4,210 Accumulated Depreciation —Equipment ............................. 4,210 To record depreciation expense. b. Mar. 31 Cash ................................ ................ 35,000 Accumulated Depreciation — Equipment ¹ ................................ .... 54,730 Gain on Disposal2 ..................... 3,330 Equipment ................................ . 86,400 To record disposal of equipment. ¹ [($86,400 − $2,200) ÷ 60 months × 39 months] = $ 54,730 $16,840 x 3 years ( 2021 -2023 ) .......................... $50,520 Depreciation for 3 months in 2024 .................. 4,210 Accumulated Depreciation to March 31 .......... $54,730 2Cost of equipment ................................ ... $86,400 Less: accumulated depreciation ............. 54,730 Carrying amount at date of disposal ....... 31,670 Proceeds from sale ................................ .. 08 35,000 Gain on disposal ................................ ...... $ 3,330 c. Mar. 31 Cash ................................ ................ 29,000 Accumulated Depreciation — Equipment ................................ ....... 54,730 Loss on Disposal3 .......................... 2,670 Equipment ................................ . 86,400 To record disposal of equipment. 3Cost of equipment ................................ ... $86,400 Less: accumulated depreciation ............. 54,730 Carrying amount at date of disposal ....... 31,670 Proceeds from sale ................................ .. 29,000 Loss on disposal ................................ ...... $ 2,670 Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BRIEF EXERCISE 9.15 Equipment (new)1 .......................... 29,000 Accumulated Depreciation —Equipment ................................ .. 30,000 Loss on Disposal2 ......................... 7,000 Equipment (old) ........................ 61,000 Cash ................................ ........... 5,000 To record exchange of equipment 1Cost of new = consideration paid in cash plus fair value of old asset: ($ 5,000 + $24,000 = $ 29,000) 2Loss on disposal = Carrying amount − fair value: [($61,000 − $ 30,000) − $24,000 = $ 7,000] LO 4 BT: AP Difficulty: C Time: 15 min. AACSB: None CPA: cpa -t001 CM: Reporting BRIEF EXERCISE 9.16 Depletion base = $6,500,000 − $500,000 = $6,000,000 Depletion per unit = $6,000,000 ÷ 25,000,000 tonnes = $0. 24 per tonne Depletion expense for ore extracted in Year 1: $0.24 per tonne × 5,000,000 tonnes = $ 1,200 ,000 Aug. 31 Inventory ................................ .... 1,200,000 Accumulated Depletion —Resource 1,200,000 To record annual depletion. LO 5 BT: AP Difficulty: M Time: 15 min. AACSB: None CPA: cpa -t001 CM: Reporting Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BRIEF EXERCISE 9.17 (a) Depletion cost per unit = $7,000,000 ÷ 35,000,000 = $.20 depletion amount per ton ne $.20 × 5,000,000 = $1, 000,000 Inventory ................................ ........ 1,000,000 Accumulated Depletion ......... 1,000,000 (b) Property, plant, and equipment: Resource ................................ ........ $7,000,000 Less: Accumulated depletion ...... 1,000 ,000 $6,000,000 LO 5 ,7 BT: AP Difficulty: M Time: 1 0 min. AACSB: None CPA: cpa -t001 CM: Reporting BRIEF EXERCISE 9.1 8 a. 2024 Jan. 2 Patents ................................ .... 150,000 Cash ................................ .... 150,000 To record cash purchase of patent. b. Dec. 31 Amortization Expense ($150,000  8) .......................... 18,750 Accumulated Amortization — Patents ............................... 18,750 To record amortization expense. LO 6 BT: AP Difficulty: S Time: 10 min. AACSB: None CPA: cpa-t001 CM: Reporting BRIEF EXERCISE 9.1 9 (a) Amortization Expense ($140 ,000 ÷ 10) 14,000 Accumulated Amortization -Patents .... 14,000 (b) Intangible Assets Patents ................................ ................. $140,000 Less: Accumulated amortization ........ 14,000 Solutions Manual for Accounting Pr inciples, 9th Canadian Edition, 9e (Volume 2) By Jerry Weygandt, Donald Kieso, Paul Kimmel, Trenholm, Warren, Novak (All Chapters) BRIEF EXERCISE 9.20 H. DENT COMPANY Balance Sheet (Partial) December 31, 2024 Property, plant, and equipment Land ................................ .......................... $ 400,000 Building ................................ .................... $1,100,000 Less: Accumulated depreciation ............ 600,000 500,000 Resource ................................ .................. 500,000 Less: Accumulated dep letion ................. 108,000 392,000 Total property, plant, and equipment ............ 1,292,000 Goodwill ................................ ................................ .......... 410,000 LO 7 BT: AP Difficulty: M Time: 15 min. AACSB: None CPA: cpa -t001 CM: Reporting BRIEF EXERCISE 9.21 ($ in US millions) Return on assets $992 [($46,799 + $45,502) ÷ 2] = 2.15% Asset turnover $20,003 [($46,799 + $45,502) ÷ 2] = 0.43 times LO 7 BT: AN Difficulty: S Time: 15 min. AACSB: Analytic CPA: cpa -t001 cpa -t005 CM: Reporting and Finance