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- At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the following three situations: 1. Machine X was purchased for 100,000 on January 1, 2015. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 45,000. The estimated residual value remains at 10,000, but the service life is now estimated to be 1 year longer than originally estimated. 2. Machine Y was purchased for 40,000 on January 1, 2018. It had an estimated residual value of 4,000 and an estimated service life of 8 years. It has been depreciated under the sum-of-the-years-digits method for 2 years. Now, the company has decided to change to the straight-line method. 3. Machine Z was purchased for 80,000 on January 1, 2019. Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value is 8,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry for each situation to record the depreciation for 2020. Ignore income taxes.On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.Hathaway Company purchased a copying machine for 8,700 on October 1, 2019. The machines residual value was 500 and its expected service life was 5 years. Hathaway computes depreciation expense to the nearest whole month. Required: 1. Compute depredation expense (rounded to the nearest dollar) for 2019 and 2020 using the: a. straight-line method b. sum-of-the-years-digits method c. double-declining-balance method 2. Next Level Which method produces the highest book value at the end of 2020? 3. Next Level Which method produces the highest charge to income in 2020? 4. Next Level Over the life of the asset, which method produces the greatest amount of depreciation expense?
- Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: 3,000 Depreciation method for financial statements: straight-line method Depreciation for income tax purposes: MACRS (3-year life) From 2019 through 2023, each year, Hunter had sales of 100,000, cost of goods sold of 60,000, and operating expenses (excluding depreciation) of 15,000. The truck was disposed of on December 31, 2023, for 2,000. Required: 1. Prepare an income statement for financial reporting through pretax accounting income for each of the 5 years, 2019 through 2023. 2. Prepare, instead, an income statement for income tax purposes through taxable income for each of the 5 years, 2019 through 2023. 3. Compare the total income for all 5 years under Requirements 1 and 2.Please answer the following question: Beaver Construction purchases new equipment for $45,360 cash on April 1, 2024. At the time of purchase, the equipment is expected to be used in operations for seven years (84 months) and have no resale or scrap value at the end. Beaver depreciates equipment evenly over the 84 months ($540/month). Required: 1.&2. Record the necessary entries in the Journal Entry Worksheet below. 3. Calculate the year-end adjusted balances of Accumulated Depreciation and Depreciation Expense (assuming the balance of Accumulated Depreciation at the beginning of 2024 is $0).Lorissa placed a rental in service on January 4, 2021. Her basis is $200,000 for the house only. On January 22, 2022, she replaced the furnace for $3,000. The January mid-month percentage is 3.485% for year 1 and 3.636% for year 2. What is the total amount of depreciation Lorissa will claim for 2022? $105 $7,272 $7,377 $7,381
- Required information (The following information applies to the questions displayed below) On January 1, 2021, the Excel delivery company purchased a delivery van for $44,000. At the end of its five-year service life, it is estimated that the van will be worth $2,000. During the five-year period, the company expects to drive the van 155,000 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. Straight line. Straight line per yearA Company purchased equipment on January 1, 2019 for AED 70,000. It is estimated that the equipment will have a AED 5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life. Required: Solve the following independent questions where you need to show all the required calculations: Part A Compute the amount of depreciation expense for the year ended December 31, 2020, using the straight-line method of depreciation. Part B:- If 16,000 units of product are produced in 2019 and 24,000 units are produced in 2020, what is the book value of the equipment at December 31, 2020? The company uses the units-of-activity depreciation method. I Part C If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation-Equipment account at December 31, 2020?Required information (The following information applies to the questions displayed below) On January 1, 2021, the Excel delivery company purchased a delivery van for $44,000. At the end of its five-year service life, it is estimated that the van will be worth $2,000. During the five-year period, the company expects to drive the van 155,000 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. Double annual depreciation for the five-year life of the van using each of the following methods. Year Depreciation 2021 2022 2023 2024 2025 Total
- Craig has decided to start snow plowing during the winter months. He purchased a heavy-duty dump truck with plow and salter from Power Equipment for $40,000 on October 1st, 2026. He paid $1,000 as a down payment and the remaining balance on a 5% -7 year note to Power Equipment. You will be completing several accounting activities in regards to this purchase. 1. Prepare the Deprecation schedule in Excel for this dump truck with plow. Use the suggested life from an IRS publication 946, Chapter 4, Under Property Classes. Craig believes the salvage (residual) value will be $10,000 after its useful life. Craig will use the straight-line depreciation method for accounting purposes. Hint: In the first year and last year you will have partial depreciation. Include a column for Accumulated Depreciation and Book Value. Be sure your table is professional and fits on one page.Oil Products Company purchases an oil tanker depot on January 1, 2020, at a cost of $600,000. Oil Products expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $75,000 to dismantle the depot and remove the tanks at the end of the depot’s useful life. Instructions a. Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2020. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2020, is $41,879. b. Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2020. Oil Products uses straight-line depreciation; the estimated salvage value for the depot is zero. c. On December 31, 2029, Oil Products pays a demolition firm to dismantle the depot and remove the tanks at a price of $80,000. Prepare the…Rayya Co. purchases a machine for $105,000 on January 1, 2019. Straight-line depreciation is taken each year for four years assuming a seven-year life and no salvage value. The machine is sold on July 1, 2023, during its fifth year of service. Prepare entries to record the partial year’s depreciation on July 1, 2023, and to record the sale under each separate situation. 1. The machine is sold for $45,500 cash. 2. The machine is sold for $25,000 cash.