D104 Intermediate Accounting II PA2 Answer and Explanation 2025
NEW VERSION Western Governors University
Equipment is placed in service on January 1. The cost of the
equipment is $250,000 with a salvage value of $25,000 and an
estimated useful life of five years.
Which amount of annual depreciation expense should be recorded
on December 31 of Year 2 under the sum-of-years'-digits method?
Key Info Used:
Cost of Equipment: $250,000
Salvage Value: $25,000
Useful Life: 5 years
Date: Depreciation for
Year 2 Step-by-Step
Solution:
1. Depreciable Base = Cost − Salvage = $250,000 − $25,000 =
$225,000
2. Sum of the Years’ Digits (SYD) for 5 years:
5+4+3+2+1=155 + 4 + 3 + 2 + 1 =
155+4+3+2+1=15
3. Year 1 Fraction = 5/15
Year 2 Fraction = 4/15
4. Year 2 Depreciation = 4/15 × $225,000 = $60,000
A company placed an asset into service on Day 1 of Year 1 with the
following data related to the purchase:
,Cost of machinery $225,000
Estimated salvage $75,000
value
Product life hours 75,000
hours
Useful life 5 years
Hours used in Year 5,000
1 hours
Which amount of annual depreciation expense should be
recorded in the first year using the activity method?
Key Info Used:
Cost of Machinery: $225,000
, Estimated Salvage Value: $75,000
Total Product Life Hours: 75,000 hours
Hours Used in Year 1: 5,000 hours
Step-by-Step Solution:
1. Depreciable Base = Cost − Salvage = $225,000 − $75,000 =
$150,000
2. Depreciation per Hour = $150,000 ÷ 75,000 hours = $2/hour
3. Year 1 Depreciation = 5,000 hours × $2/hour = $10,000
On July 1, a company placed into service a vehicle for $50,000 with an
estimated useful life of five years and no salvage value. The
company prepares accrual-basis financial statements on a
calendar-year basis.
How many months should be included in the calculation of
depreciation expense for the year of acquisition using the double-
declining-balance method?
Service Date: July 1
Depreciation Method: Double-Declining-Balance
Reporting Basis: Calendar year
No salvage value
July 1 to December 31 = 6 months used in the first year
A company purchased a piece of equipment for $120,000 and
estimated that the asset will have no salvage value at the end of
its 15-year useful life. At the end of Year 5 of ownership, when
accumulated depreciation was $40,000 and the asset's book value
was $80,000, the company revised the asset's original estimated
useful life to a total of 10 years.
What is the appropriate accounting treatment beginning
with Year 6? Key Info Used:
Original Cost: $120,000
Accumulated Depreciation after Year 5: $40,000
Book Value at End of Year 5: $80,000
NEW VERSION Western Governors University
Equipment is placed in service on January 1. The cost of the
equipment is $250,000 with a salvage value of $25,000 and an
estimated useful life of five years.
Which amount of annual depreciation expense should be recorded
on December 31 of Year 2 under the sum-of-years'-digits method?
Key Info Used:
Cost of Equipment: $250,000
Salvage Value: $25,000
Useful Life: 5 years
Date: Depreciation for
Year 2 Step-by-Step
Solution:
1. Depreciable Base = Cost − Salvage = $250,000 − $25,000 =
$225,000
2. Sum of the Years’ Digits (SYD) for 5 years:
5+4+3+2+1=155 + 4 + 3 + 2 + 1 =
155+4+3+2+1=15
3. Year 1 Fraction = 5/15
Year 2 Fraction = 4/15
4. Year 2 Depreciation = 4/15 × $225,000 = $60,000
A company placed an asset into service on Day 1 of Year 1 with the
following data related to the purchase:
,Cost of machinery $225,000
Estimated salvage $75,000
value
Product life hours 75,000
hours
Useful life 5 years
Hours used in Year 5,000
1 hours
Which amount of annual depreciation expense should be
recorded in the first year using the activity method?
Key Info Used:
Cost of Machinery: $225,000
, Estimated Salvage Value: $75,000
Total Product Life Hours: 75,000 hours
Hours Used in Year 1: 5,000 hours
Step-by-Step Solution:
1. Depreciable Base = Cost − Salvage = $225,000 − $75,000 =
$150,000
2. Depreciation per Hour = $150,000 ÷ 75,000 hours = $2/hour
3. Year 1 Depreciation = 5,000 hours × $2/hour = $10,000
On July 1, a company placed into service a vehicle for $50,000 with an
estimated useful life of five years and no salvage value. The
company prepares accrual-basis financial statements on a
calendar-year basis.
How many months should be included in the calculation of
depreciation expense for the year of acquisition using the double-
declining-balance method?
Service Date: July 1
Depreciation Method: Double-Declining-Balance
Reporting Basis: Calendar year
No salvage value
July 1 to December 31 = 6 months used in the first year
A company purchased a piece of equipment for $120,000 and
estimated that the asset will have no salvage value at the end of
its 15-year useful life. At the end of Year 5 of ownership, when
accumulated depreciation was $40,000 and the asset's book value
was $80,000, the company revised the asset's original estimated
useful life to a total of 10 years.
What is the appropriate accounting treatment beginning
with Year 6? Key Info Used:
Original Cost: $120,000
Accumulated Depreciation after Year 5: $40,000
Book Value at End of Year 5: $80,000
