Minicase: On December 31, 2006, the Mallory Corporation had the following activity in its fixed assets record. Assume all assets were purchased on January 1.
|
Equipment
|
Cost
|
Salvage
|
Date
|
Life
|
Method of Depreciation
|
|
Machine 1
|
$65,000
|
$5,000
|
2002
|
5
|
DDB
|
|
Building #3
|
$900,000 not including land
|
$50,000
|
2004
|
25
|
S/L
|
|
Mine 316
|
$1,000,000
|
$0
|
2003
|
1,000,000 tons
|
30,000 tons extracted
|
|
Mine 682
|
$500,000
|
$100,000
|
2001
|
40,000 barrels
|
6,000 barrels extracted
|
|
Patent
|
$50,000
|
0
|
2004
|
17
|
|
|
Truck 1
|
$35,000
|
$3,000
|
2004
|
200,000 miles
|
Units of production: total miles depreciated to date are 60,000 as of January 1, 2006. Miles this year 30,000
|
|
Truck 2
|
$50,000
|
$5,000
|
2006
|
150,000 miles
|
Units of production, miles this year are 15,000
|
|
Truck 3
|
$75,000
|
$10,000
|
2001
|
200,000 miles
|
Units of production: total miles depreciated to date are 180,000 as of January 1, 2006. Miles in 2006 are 30,000 miles.
|
|
Machine 2
|
$100,000
|
$5,000
|
2003
|
10
|
S/L
|
REQUIRED:
- Compute the depletion, amortization, and depreciation expense on December 31, 2006 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 life increased from 25 years to 30 years, revise the depreciation and prepare the entry.
- Suppose that the corporation spent $20,000 in 2006 to defend the patent. Record the entry.