Question

The snack stop had the following long-term asset balances as of January 1, 2024: cost accumulated depreciation book value land 66,000 066,000 building 541,000 (194,760) 346,240 equipment 131,900 (26,200) 105,700 patent 77,500 (31,000) 46,500 additional information: the snack stop purchased all the assets at the beginning of 2022. the building is depreciated over a 10-year service life using the double-declining-balance method and estimating no residual value. the equipment is depreciated over a 9-year useful life using the straight-line method with an estimated residual value of14,000. the patent is estimated to have a five-year service life with no residual value and is amortized using the straight-line method. depreciation and amortization have been recorded for 2022 and 2023 (first two years). required: 1. For the year ended December 31, 2024 (third year), record depreciation expense for buildings and equipment. Land is not depreciated. 2. For the year ended December 31, 2024, record amortization expense for the patent. 3. Calculate the book value for each of the four long-term assets at December 31, 2024.

Answer 1

To record depreciation expense for buildings, use the double-declining-balance method. Depreciation expense for equipment is calculated using the straight-line method. Amortization expense for the patent is determined by dividing its book value by its estimated lifespan.

Step-by-step explanation:

1. To record depreciation expense for buildings, we need to calculate the annual depreciation. The building has a cost of $541,000 and is depreciated over a 10-year service life using the double-declining-balance method with no residual value. The formula for double-declining-balance depreciation is: (2 / useful life) * book value. In this case, the depreciation would be (2 / 10) * $541,000 = $108,200.

To record depreciation expense for equipment, we need to calculate the annual depreciation. The equipment has a cost of $131,900, an estimated useful life of 9 years, and an estimated residual value of $14,000. The formula for straight-line depreciation is: (cost - residual value) / useful life. In this case, the depreciation would be ($131,900 - $14,000) / 9 = $14,544.

2. To record amortization expense for the patent, we need to divide its book value by its estimated lifespan. The patent has a book value of $46,500 and an estimated lifespan of 5 years. Therefore, the annual amortization expense would be $46,500 / 5 = $9,300.

3. To calculate the book value for each long-term asset at December 31, 2024, subtract the accumulated depreciation or amortization from the cost. The book value for the land remains the same at $66,000. The book value for the building would be $541,000 - $194,760 = $346,240. The book value for the equipment would be $131,900 - $40,744 = $91,156. The book value for the patent would be $77,500 - $27,900 = $49,600.