This problem continues the Canyon Canoe Company situation from Chapter 8. Amber and Zack Wilson are continuing to review business practices. Currently, they are reviewing the company’s property, plant, and equipment and have gathered the following information:

Asset	Acquisition Date	Cost	Estimated Life	Estimated Residual value	Depreciation Method	Monthly Depreciation Expense
Canoes	Nov. 3, 2018	\(4,800	4 Years	\) 0	SL	$100
Land	Dec 1, 2018	85,000			n/a
Building	Dec 1, 2018	35,000	5 Years	5,000	SL	500
Canoes	Dec 2, 2018	7,200	4 Years	0	SL	150
Computer	Mar. 2, 2019	3,600	3 Years	300	DDB
Office Furniture	MAR. 3, 2019	3,000	5 Years	600	SL

*SL = Straight@line; DDB = Double@declining@balance

Requirements

1. Calculate the amount of monthly depreciation expense for the computer and office furniture for 2019.

2. For each asset, determine the book value as of December 31, 2018. Then, calculate the depreciation expense for the first six months of 2019 and the book value as of June 30, 2019.

3. Prepare a partial balance sheet showing Property, Plant, and Equipment as of June 30, 2019.

Step by step solution

01

Monthly depreciation expense for computer and office equipment

$\begin{array}{rcl}\mathrm{Monthly}\mathrm{depreciation}\mathrm{expense}\mathrm{for}\mathrm{computer}& =& \frac{\mathrm{Cost}-\mathrm{Residual}\mathrm{value}}{\mathrm{Estimated}\mathrm{life}}\times \frac{2}{\mathrm{No}.\mathrm{of}\mathrm{months}\mathrm{in}\mathrm{year}}\\ & =& \frac{\$3,600-\$300}{3}\times \frac{2}{12}\\ & =& \$183.33\\ & & \\ \mathrm{Monthly}\mathrm{depreciation}\mathrm{expense}\mathrm{for}\mathrm{office}\mathrm{furniture}& =& \frac{\mathrm{Cost}-\mathrm{Residual}\mathrm{value}}{\mathrm{Estimated}\mathrm{value}}\times \frac{1}{\mathrm{No}.\mathrm{of}\mathrm{months}\mathrm{in}\mathrm{year}}\\ & =& \frac{\$3,000-\$600}{5}\times \frac{1}{12}\\ & =& \$40\end{array}$

02

Book Value as of 31 Dec 2018

Asset (A)	Acquisition date (B)	Cost (C)	Monthly depreciation (D)	Depreciation for the year (E = DXB)	Book Value (F = C-E)
Canoes	Nov. 3 2018	$ 4,800	$100	$200	$ 4,600
Land	Dec 1. 2018	85,000			85,000
Building	Dec 1. 2018	35,000	$500	$500	34,500
Canoes	Dec 2. 2018	7,200	$150	$150	$ 7,050

Depreciation expense for the first 6 months and book value on June 30 2019

Asset (A)	Book Value (C)	Monthly depreciation (D)	Depreciation for the year E	Book Value (F = C-E)
Canoes	$ 4,600	$100	$600	$ 4,600
Land	85,000			85,000
Building	34,500	$500	$3,000	34,500
Canoes	7,050	$150	$900	7,050
Computer	3,600	$183.33	$733	2,867
Office Furniture	3,000	$40	$160	2,840

03

Partial Balance sheet as on June 30, 2019

Property, Plant, and Equipment on the balance sheet (June 30)
Property, Plant, and Equipment
Land		$ 85,000
Building	$ 35,000
Less: Accumulated Depreciation – building	- 3,500	31,500
Canoes	12,000
Less: Accumulated Depreciation – Canoes	- 1,850	10,150
Computer	3,600
Less: Accumulated Depreciation - Computer	733	2,867
Office Furniture	3,000
Less: Accumulated Depreciation – Office Furniture	160	2,840
Property, Plant, and Equipment, Net		$ 132,357

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