FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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,
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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