Fill This Form To Receive Instant Help
Homework answers / question archive / 1)Becker Office Service purchased a new computer system in Year 1 for $32,300
1)Becker Office Service purchased a new computer system in Year 1 for $32,300. It is expected to have a five-year useful life and a $4,000 salvage value. The company expects to use the system more extensively in the early years of its life. Required a. Calculate the depreciation expense for each of the five years, assuming the use of straight-line depreciation. Year Depreciation Expense 1 2 3 4 5
b. Calculate the depreciation expense for each of the five years, assuming the use of double-declining-balance depreciation. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.) Year Depreciation Expense 1 2 3 4 5 d. Assume that Becker Office Service sold the computer system at the end of the third year for $18,500. Compute the amount of gain or loss using each depreciation method. (Round your answers to the nearest dollar amount.) Straight-Line Double-Declining Balance
2)Banko Inc, manufactures sporting goods. The following information applies to a machine purchased on January 1, Year 1: Purchase price Delivery cost Installation charge Estimated life Estimated units Salvage estimate $ 91,600 $ 7,000 $ 2,000 5 years 156,000 $ 7,000 ek ences During Year 1, the machine produced 52,000 units, and during Year 2 it produced 54,000 units. Required a. Determine the amount of depreciation expense for Year 1 and Year 2 using straight-line method, b. Determine the amount of depreciation expense for Year 1 and Year 2 using double-declining balance method. c. Determine the amount of depreciation expense for Year 1 and Year 2 using units of production method. d. Determine the amount of depreciation expense for Year 1 and Year 2 using MACRS, assuming that the machine is classified as seven-year property (Round your answers to the nearest dollar amount.) MACRS table: 5-Year 7-Year Year property. property. 1 20.00 14.29 2 32.00 24.49 3 19.20 17.49 4 11.52 12.49 5 11.52 8.93 6 5.76 8.92
c. Determine the amount of depreciation expense for Year 1 and Year 2 using units of production d. Determine the amount of depreciation expense for Year 1 and Year 2 using MACRS, assuming seven-year property. (Round your answers to the nearest dollar amount.) MACRS table: 5-Year 7-Year Year property, & property, % 1 20.00 14.29 2 32.00 24.49 3 19.20 17.49 4 11.52 12.49 5 11.52 8.93 6 5.76 8.92 7 8.93 8 4.46 Year 1 Year 2 a. Depreciation expense b. Depreciation expense c. Depreciation expense d. Depreciation expense
1)
a) Straight line depreciation method
Cost of computer = $ 32300
Salvage Value = $ 4000
Useful Life = 5 years
Depreciation for each year = ( 32300 - 4000 ) ÷ 5
= 28300 ÷ 5
= 5660
Year | Depreciation |
1 | 5660 |
2 | 5660 |
3 | 5660 |
4 | 5660 |
5 | 5660 |
Total | 28300 |
b) Double declining depreciation method
Cost of computer = $ 32300
Salvage Value = $ 4000
Useful Life = 5 years
Double Declining Rate = (2 × 100%) ÷ 5
= 40 %
Depreciation for each year :
Year | Book Value | Computation | Depreciation |
1 | 32300 | 32300 × 40% | 12920 |
2 | 19380 | 19380 × 40% | 7752 |
3 | 11628 | 11628 × 40% | 4651.20 |
4 | 6976.80 | 6976.80 × 40% | 2790.72 |
5 | 4186.08 | 4186.08 - 4000 | 186.08 |
Total | 28300 |
The final double Declining balance depreciation was $ 186.08, which is less than the actual $ 1674.432 ( 4186.08 × 40% ). It was done to keep the salvage value as expected.
c) Amount of gain or loss
Particulars | Straight Line | Double Declining |
Cost | $ 32300 | $ 32300 |
Accumulated depreciation for 3 years | $ 16980 | $ 25323.2 |
Book Value at the end of third year | $ 15320 | $ 6976.80 |
Sale value | $ 18500 | $ 18500 |
Gain on sale | $ 3180 | $ 11523.2 |
2)
Solution:
Purchase price of Machune | $91,600 |
Add:Delivary cost | $7,000 |
Add:Installation charge | $2,000 |
Total Cost of Machine | $100600 |
Less:Salvage value | $(7,000) |
Depreciable cost of machine | $93600 |
Estimated life | 5years |
Straight line method:
Therefore,
Depreciation exprenses for the year 1 = $18720
Depreciation exprenses for the year 2 = $18720
Depreciation exprense is same for all year under Straight line method.
Units of Production method:
Depreciation expense for the year 1 =Units produced * Depreciable cost per unit
= 52,000*$0.6 = $31,200
Depreciation expense for the year 2 =Units produced * Depreciable cost per unit
= 54,000*$0.6 = $32,400
Depreciation Under MACRS :
Depreciation expense = Cost of asset * Depreciation rate from .MACRS table
Year1 | Year2 | |
Cost of Asset | $100600 | $100600 |
Depreciation rate | 14.29% | 24.49% |
Depreciation expense | $14,376 | $24,637 |
Year1 | Year2 | ||
a | Depreciation expense | $18720 | $18720 |
b | Depreciation expense | $40240 | $24144 |
c | Depreciation expense | $31200 | $32,400 |
d | Depreciation expense | $14,376 | $24,637 |
please see the attached file.