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1)Becker Office Service purchased a new computer system in Year 1 for $32,300

Accounting

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

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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

 

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