Everly Corporation acquires a coal mine at a cost of $400,000. Intangible development costs total $100,000. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $80,000), after which it can be sold for $160,000. Everly estimates that 4,000 tons of coal can be extracted. If 700 tons are extracted the first year, prepare the journal entry to record depletion.
Inventory = $73,500
Depletion is defined as a reduction in the quantity of a production factor due to the manufacturing process. Companies generate new products by combining current goods and services. When old items are turned into new products, it is termed a production process.
Calculating inventory per ton value
Calculating the value of inventory
(Depreciation Basic Concepts) Burnitz Manufacturing Company was organized on January 1, 2017. In 2017, it has used in its reports to management the straight-line method of depreciating its plant assets.
On November 8, you are having a conference with Burnitz’s officers to discuss the depreciation method to be used for income tax and stockholder reporting. James Bryant, president of Burnitz, has suggested the use of a new method, which he feels is more suitable than the straight-line method for the needs of the company during the period of rapid expansion of production and capacity that he foresees. Following is an example in which the proposed method is applied to a fixed asset with an original cost of $248,000, an estimated useful life of 5 years, and a salvage value of approximately $8,000.
Year of life used
Accumulated depreciation at the end of year
Book value at the end of Year
The president favors the new method because he has heard that:
(2) Assume that the Internal Revenue Service accepts the proposed depreciation method in this case. If the proposed method were used for stockholder and tax reporting purposes, how would it affect the availability of cash flows generated by operations?
Jurassic Company owns machinery that cost $900,000 and has accumulated depreciation of $380,000. The present value of expected future net cash flows from the use of the asset are expected to be $500,000. The fair value less cost of disposal of the equipment is $400,000. Prepare the journal entry, if any, to record the impairment loss.
Ortiz purchased a piece of equipment that cost $202,000 on January 1, 2017. The equipment has the following components.
Estimated Useful Life
Compute the depreciation expense for this equipment at December 31, 2017.
(Depreciation Computations—Four Methods) Robert Parish Corporation purchased a new machine for its assembly process on August 1, 2017. The cost of this machine was $117,900. The company estimated that the machine would have a salvage value of $12,900 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 21,000 hours. Year-end is December 31.
Compute the depreciation expense under the following methods. Each of the following should be considered unrelated.
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