ACCY 2001
Assignment #4

Fall 2016

Due Monday, November 14 (on Blackboard)

Problem #1 Reese Corporation

Assume that the following was shown on the balance sheet related to property, plant and equipment on January 1, 2014:

Total PPE: $29,347

Less: Accum. Depr. 17,588

$11,759

Also assume that a footnote says the following: "property, plant, and equipment is depreciated using the straight-line method." Annual depreciation expense is approximately $1,800.

1. Estimate the average useful life of depreciable assets (assume no residual values).

2. Estimate the average age of depreciable assets on January 1, 2014.

Problem # 2 Obtain Wal-Mart's 2013 Annual Report
1. a) How much cash was received from the sale (disposal) of property, plant, and equipment during 2013?

b) Assume the cost of the PPE sold during 2013 was $950M and the accumulated depreciation on PPE sold amounted to $350M. What is the gain or loss on the sale?

2. Assume that Wal-Mart purchased equipment at the beginning of fiscal year 2009 for $480,000 cash. The equipment had an estimated useful life of 8 years and a residual value of $30,000.

a. What would depreciation expense be for year 3 under the straight-line method?

b. What would depreciation expense be for year 3 under the double-declining balance method?

c. What is the first year in which depreciation expense under the straight-line method is higher than under the declining balance method?

d. Assume Wal-Mart uses the straight-line depreciation method for its equipment. Also assume that at fiscal year-end 2013, Wal-Mart sold the equipment purchased at the beginning of fiscal year 2009 for $200,000 cash. Prepare the journal entry to record the sale of the equipment at year-end 2013.