Financial Accounting Various Depreciation Method Homework Help
- September 6, 2017
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- Category: Accounting QA
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1.Calculations for various depreciation methods.
On January 1, 2013, Luck Delivery Company acquired a new truck for $30,000. It estimated the truck to have a useful life of five years and no salvage value. The company closes its books annually on December 31. Indicate the amount of the depreciation charge for each year of the assets life under the following methods.
a. the straight line (time) method
b. the double declining balance method with a switch to straight line in 2016
c. the sum of the years digits method
d. the truck belongs to a category of property for tax purposes requiring the following proportions of the assets cost to be depreciated each year: 0.20, 0.32, 0.192, 0.115, 0.115, 0.058. the tax law allows firms to ignore salvage value in declining depreciation.
2.Tumnus Company purchased a delivery truck for $30,000 on January 1, 2012. The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2012 and 12,000 in 2013.
Instructions
(a) Compute depreciation expense for 2012 and 2013 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method.
(b) Assume that Tumnus uses the straight-line method.
(1) Prepare the journal entry to record 2012 depreciation.
(2) Show how the truck would be reported in the December 31, 2012, balance sheet.
3.McCollum Company, a furniture wholesaler, acquired new equipment at a cost of $150,000 at the beginning of the fiscal year. The equipment has an estimated life of five years and an estimated residual value of $12,000. Ellen McCollum, the president, has requested information regarding alternative depreciation methods.
Instructions
1. Determine the annual depreciation for each of the five years of estimated useful life of the equipment, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by
(a) the straight-line method and
(b) the double-declining-balance method.
2. Assume that the equipment was depreciated under the double-declining-balance method. In the first week of the fifth year, the equipment was traded in for similar equipment priced at $175,000. The trade-in allowance on the old equipment was $10,000, and cash was paid for the balance. Journalize the entry to record the exchange.
4.Air Pack Company purchased packaging equipment on January 3, 2006, for $90,000. The equipment was expected to have a useful life of three years, or 21,000 operating hours, and a residual value of $6,000. The equipment was used for 8,000 hours during 2006, 7,500 hours in 2007, and 5,500 hours in 2008.
Instructions
Determine the amount of depreciation expense for the years ended December 31, 2006, 2007, and 2008, by
(a) the straight-line method,
(b) the units-of-production method, and
(c) the double-declining-balance method.
Also determine the total depreciation expense for the three years by each method. The following columnar headings are suggested for recording the depreciation expense amounts
Depreciation Ex | |||
Straight- | Units-of- | Double-Declining- | |
Line | Production | Balance | |
Year | Method | Method | Method |
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5.New lithographic equipment, acquired at a cost of $175,000 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $15,000. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected. In the first week of the fifth year, the equipment was traded in for similar equipment priced at $240,000. The trade-in allowance on the old equipment was $25,000, cash of $15,000 was paid, and a note payable was issued for the balance.
Instructions
a. Determine the annual depreciation expense for each of the estimated five years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by
(a) the straight-line method and
(b) the double-declining-balance method. The following columnar headings are suggested for each schedule
Accumulated | |||
Depreciation | Depreciation, | Book Value, | |
Year | Expense | End of Year | End of Year |
b. For financial reporting purposes, determine the cost of the new equipment acquired in the exchange.
c. Journalize the entry to record the exchange.
d. Journalize the entry to record the exchange, assuming that the trade-in allowance was $18,000 instead of $25,000.
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