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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Buffalo, Inc., uses composite
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- Given a cost of a depreciable fixed asset of $24,000 with a salvage value of $2,000 and a life of 5 years, what is the annual depreciation of the fixed asset using the straight-line method? What would be the depreciation in the second year if it used the declining balance method at double the straight-line rate? In regards to question #1, if the company used the straight-line method and sold the asset after 4 years for $7,000, what would be the journal entry needed to record the transaction? What if they sold it for $5,000?arrow_forwardBob Co purchased a building for $50,000 and began depreciating assuming a salvage value of $5,000 and useful life of 20 years. After 5 years, it was determined that the salvage value would be $10,000, but the useful life would only be for an additional 10 years. Calculate the depreciation, assuming straight line, for Year 1 and Year 6 of the building, and prepare the necessary journals.arrow_forwardA tool is purchased for $500,000. The expected life is 25 years. The salvage value is $100,000. what is the second year’s depreciation using the double declining balance method.arrow_forward
- A truck acquired at a cost of $195,000 has an estimated residual value of $9,000, has an estimated useful life of 62,000 miles, and was driven 6,200 miles during the year. Determine the following. If required, round your answer for the depreciation rate to two decimal places. (a) The Depreciable Cost $fill in the blank 1 (b) The Depreciation Rate $fill in the blank 2 per mile (c) The Units-of-activity Depreciation for the Year $fill in the blank 3arrow_forwardKeller Industries uses the straight-line depreciation method. One asset had been purchased for $6,000. Annual depreciation expense was $600. after considering residual value of $1,000. What was the approximate life of the asset? a. 5.0 years b. 8.3 years c. 9.5 years d. 10.2 yearsarrow_forwardA truck acquired at a cost of $195,000 has an estimated residual value of $11,250, has an estimated useful life of 35,000 miles, and was driven 2,800 miles during the year. Determine the following. If required, round your answer for the depreciation rate to two decimal places. (a) The depreciable cost (b) The depreciation rate per mile (c) The units-of-activity depreciation for the yeararrow_forward
- A piece of equipment is available for purchase for $ 16000 has an estimated useful life of 5 years, and has an estimated salvage value of $ 4000. Determine the depreciation and the book value for each of the 5 years using the straight-line method and the double declining-balance method? (Compare)arrow_forwardJim Company bought a machine for $34,800 with an estimated life of 5 years. The residual value of the machine is $5,800. Assume straight-line depreciation. a. Calculate the annual depreciation. Annual depreciation b. Calculate the book value at the end of year 3. Book valuearrow_forwardThe double-declining-balance method is to be used for an asset with a cost of $90.000. estimated salvage value of $ 12.000. and estimated useful life of five years.(a) What is the depreciation for the first three tax years, assuming that the asset was placed in service at the beginning of the year?(b) If switching to the straight-line method is allowed, when is the optimal time to switch?arrow_forward
- COCOLOS Industries uses the straight-line depreciation method. One asset had been purchased for $6,000. Annual depreciation expense was $600.00 after considering residual value of $1,000. What was the approximate life of the asset? a. 5.0 yearsb. 8.3 yearsc. 9.5 yearsd. 10.2 yearsarrow_forwardConsider the following accounting information for a computer system: Cost basis of the asset, I = $10,000, Useful life, N = 5 years, Estimated salvage value, S = $0. Use the double-declining-depreciation method to compute the annual depreciation allowances and the resulting book values.arrow_forwardYou are evaluating two different devices. Equipment A costs $215,000 and is used for a period of three years, with a pre-tax operating cost of $32,000 per year. Equipment B costs $355,000 and is used for six years, with a pre-tax operating cost of $42,000 per year. Both units were depreciated to book value of 0 over the life of the unit using the linear old method of depreciation, assuming a residual value of $20,000. If your tax rate is 35%, the discount rate is 9%. Calculate the average cost of the two machines for the year. Which machine do you prefer?Why?arrow_forward
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