acct chp 22 part 3

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$45,000.

On January 1, 2008, Neal Corporation acquired equipment at a cost of $540,000. Neal adopted the sum-of-the-years'-digits method of depreciation for this equipment and had been recording depreciation over an estimated life of eight years, with no residual value. At the beginning of 2011, a decision was made to change to the straight-line method of depreciation for this equipment. The depreciation expense for 2011 would be

$18,286.

On January 1, 2008, Knapp Corporation acquired machinery at a cost of $250,000. Knapp adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. At the beginning of 2011, a decision was made to change to the straight-line method of depreciation for the machinery. The depreciation expense for 2011 would be

$154,000

On January 1, 2008, Piper Co., purchased a machine (its only depreciable asset) for $300,000. The machine has a five-year life, and no salvage value. Sum-of-the-years'-digits depreciation has been used for financial statement reporting and the elective straight-line method for income tax reporting. Effective January 1, 2011, for financial statement reporting, Piper decided to change to the straight-line method for depreciation of the machine. Assume that Piper can justify the change.
Piper's income before depreciation, before income taxes, and before the cumulative effect of the accounting change (if any), for the year ended December 31, 2011, is $250,000. The income tax rate for 2011, as well as for the years 2008-2010, is 30%. What amount should Piper report as net income for the year ended December 31, 2011?

$0.

On January 1, 2008, Nobel Corporation acquired machinery at a cost of $600,000. Nobel adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2011, a decision was made to change to the double-declining balance method of depreciation for this machine.

47. Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning retained earnings, is

$120,000.

On January 1, 2008, Nobel Corporation acquired machinery at a cost of $600,000. Nobel adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2011, a decision was made to change to the double-declining balance method of depreciation for this machine.

48. The amount that Nobel should record as depreciation expense for 2011 is

$252,000.

49. On December 31, 2011 Dean Company changed its method of accounting for inventory from weighted average cost method to the FIFO method. This change caused the 2011 beginning inventory to increase by $420,000. The cumulative effect of this accounting change to be reported for the year ended 12/31/11, assuming a 40% tax rate, is

$19,800.

52. Equipment was purchased at the beginning of 2008 for $204,000. At the time of its purchase, the equipment was estimated to have a useful life of six years and a salvage value of $24,000. The equipment was depreciated using the straight-line method of depreciation through 2010. At the beginning of 2011, the estimate of useful life was revised to a total life of eight years and the expected salvage value was changed to $15,000. The amount to be recorded for depreciation for 2011, reflecting these changes in estimates, is

$0

Swift Company purchased a machine on January 1, 2008, for $300,000. At the date of acquisition, the machine had an estimated useful life of six years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2011, Swift determined, as a result of additional information, that the machine had an estimated useful life of eight years from the date of acquisition with no salvage. An accounting change was made in 2011 to reflect this additional information.

53. Assume that the direct effects of this change are limited to the effect on depreciation and the related tax provision, and that the income tax rate was 30% in 2008, 2009, 2010, and 2011. What should be reported in Swift's income statement for the year ended December 31, 2011, as the cumulative effect on prior years of changing the estimated useful life of the machine?

$30,000

Swift Company purchased a machine on January 1, 2008, for $300,000. At the date of acquisition, the machine had an estimated useful life of six years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2011, Swift determined, as a result of additional information, that the machine had an estimated useful life of eight years from the date of acquisition with no salvage. An accounting change was made in 2011 to reflect this additional information.

54. What is the amount of depreciation expense on this machine that should be charged in Swift's income statement for the year ended December 31, 2011?

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