Depreciation Choices and Outcome. Mulligan Co. purchased a new machine on January 1. The following information pertains to the purchase: Life of asset 5 years Salvage value $3,000 Purchase price 18,000 Sales tax 1,000 Freight cost 800 Electrical set-up 700 Custom programming 500 Estimated annual labor savings 3,500 Additional revenue generated 8,000   a. Determine the capitalized cost of the new machine $Answer b. Compute annual depreciation, accumulated depreciation and the machine's book value for the first three year assuming: i. Straight-line depreciation ii. Double-declining-balance method   Straight-Line Depreciation Double-Declining Balance   Depreciation Expense Accumulated Depreciation Book Value at Year-end   Depreciation Expense Accumulated Depreciation Book Value at Year-End Year 1               Year 2               Year 3                   c. Assume the machine is sold for $8,000 at the end of the third year after depreciation has been calculated. Determine the gain or loss assuming: i. Straight-line depreciation ii. Double-declining balance method   Do not use negative signs with your answers below.     Amount Gain or Loss Straight-line       Double-declining

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Chapter1: Financial Statements And Business Decisions
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Depreciation Choices and Outcome.
Mulligan Co. purchased a new machine on January 1. The following information pertains to the purchase:

Life of asset 5 years
Salvage value $3,000
Purchase price 18,000
Sales tax 1,000
Freight cost 800
Electrical set-up 700
Custom programming 500
Estimated annual labor savings 3,500
Additional revenue generated 8,000

 

a. Determine the capitalized cost of the new machine
$Answer

b. Compute annual depreciation, accumulated depreciation and the machine's book value for the first three year assuming:
i. Straight-line depreciation
ii. Double-declining-balance method

 

Straight-Line Depreciation Double-Declining Balance
  Depreciation
Expense
Accumulated
Depreciation
Book Value at
Year-end
  Depreciation
Expense
Accumulated
Depreciation
Book Value at
Year-End
Year 1              
Year 2              
Year 3              

 

 

c. Assume the machine is sold for $8,000 at the end of the third year after depreciation has been calculated.
Determine the gain or loss assuming:
i. Straight-line depreciation
ii. Double-declining balance method  

Do not use negative signs with your answers below.

    Amount Gain or Loss
Straight-line      
Double-declining      
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