Question 4 of 5 Current Attempt in Progress Legend Service Center just purchased an automobile hoist for $37,200. The hoist has an 8-year life and an estimated salvage value of $3,400. Installation costs and freight charges were $3,600 and $800, respectively. Legend uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Legend estimates that the new hoist will enable his mechanics to replace 5 extra mufflers per week. Each muffler sells for $72 installed. The cost of a muffler is $37, and the labor cost to install a muffler is $15. (a) Compute the cash payback period for the new hoist. Cash payback period (b) Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, eg. 10.52%) Annual rate of return i eTextbook and Media eTextbook years Save for Later Assistance Used

Question 4 of 5 Current Attempt in Progress Legend Service Center just purchased an automobile hoist for $37,200. The hoist has an 8-year life and an estimated salvage value of $3,400. Installation costs and freight charges were $3,600 and $800, respectively. Legend uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Legend estimates that the new hoist will enable his mechanics to replace 5 extra mufflers per week. Each muffler sells for $72 installed. The cost of a muffler is $37, and the labor cost to install a muffler is $15. (a) Compute the cash payback period for the new hoist. Cash payback period (b) Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, eg. 10.52%) Annual rate of return i eTextbook and Media eTextbook years Save for Later Assistance Used

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter9: Depreciation (deprec)

Section: Chapter Questions

Problem 1R: Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an...

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PROBLEM 3. Replacement Project Atlantic Control Company (ACC) purchased a machine two years ago at a cost of $70,000. At that time, the machine's expected economic life was six years and its salvage value at the end of its life was estimated to be $10,000. It is being depreciated using the straight-line method so that its book value at the end of six years is $10,000. In four years, however, the old machine will have a market value of $0. A new machine can be purchased for $80,000, including shipping and installation costs. The new machine has an economic life estimated to be four years. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its five-year economic life. During its four-year life, the new machine will reduce cash operating expenses by $20,000 per year. Sales are not expected to change. But the new machine will require net working capital to be increased by $4,000. At the end of its useful life, the machine is…
Problem 4: A heavy planner was purchased 12 years ago for P 50,000 with no salvage value. As the life of the planner was 20 years, a depreciation reserve has been provided on that basis. Now the owner wishes to replace the old planner by a newly – designed planner with several advantages. The old planner can sell for P 10,000. If the new planner costs P 70,000, how much new capital will be required to make the purchase if the depreciation is computed using SHOW COMPLETE SOLUTION -SL Method -SF Method at 10% -SYD Method
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. Dunedin buys equipment frequently and wants to print a depreciation schedule for each assets life. Review the worksheet called DEPREC that follows these requirements. Since some assets acquired are depreciated by straight-line, others by units of production, and others by double-declining balance, DEPREC shows all three methods. You are to use this worksheet to prepare depreciation schedules for the new machine.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.
IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, Dans Demolition purchased two jackhammers for 2,500 each with a salvage value of 100 each and estimated useful lives of four years. On January 1, 20-2, a stronger blade to improve performance was installed in Jackhammer A for 800 cash and the compressor was replaced in Jackhammer B for 200 cash. The compressor is expected to extend the life of Jackhammer B one year beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Jackhammers A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each jackhammer for 20-2 through 20-4.
Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and is expected to be driven for ten years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After five years of recording depreciation, Montezuma determines that the delivery truck will be useful for another five years (ten years in total, as originally expected) and that the salvage value will increase to $10,000. Determine the depreciation expense for the final five years of the assets life, and create the journal entry for years 6â€“10 (the entry will be the same for each of the five years).
Problem 3: A machine currently in use was originally purchased 2 years ago for $40,000. The machine is being depreciated under MACRS using a 5-year recovery period; it has 3 years of usable life remaining. The current machine can be sold today to net $42,000 after removal and cleanup costs. A new machine, using a 3-year MACRS recovery period, can be purchased at a price of $140,000. It requires $10,000 to install and has a 3-year usable life. If the new machine is acquired, the investment in accounts receivable will be expected to rise by $10,000, the inventory investment will increase by $25,000, and accounts payable will increase by $15,000. Earnings before depreciation, interest, and taxes are expected to be $70,000 for each of the next 3 years with the old machine and to be $120,000 in the first year and $130,000 in the second and third years with the new machine. At the end of 3 years, the market value of the old machine will equal zero, but the new machine could be sold to net…
A diamond mining company has just purchased a new crystal extraction machine that cost $5000 and has an estimated salvage value of $1000 at the end of its 8-year useful life. What is its depreciation in Year 5 using the SOYD method? Question 19 options: a) $786 b) $655 c) $444 d) $859
Problem 3: A machine currently in use was originally purchased 2 years ago for $40,000. The machine is being depreciated under MACRS using a 5-year recovery period; it has 3 years of usable life remaining. The current machine can be sold today to net $42,000 after removal and cleanup costs. A new machine, using a 3-year MACRS recovery period, can be purchased at a price of $140,000. It requires $10,000 to install and has a 3-year usable life. If the new machine is acquired, the investment in accounts receivable will be expected to rise by $10,000, the inventory investment will increase by $25,000, and accounts payable will increase by $15,000. Earnings before depreciation, interest, and taxes are expected to be $70,000 for each of the next 3 years with the old machine and to be $120,000 in the first year and $130,000 in the second and third years with the new machine. At the end of 3 years, the market value of the old machine will equal zero, but the new machine could be sold to net…
View Policies Current Attempt in Progress Teal Mountain Inc. purchased a tractor trailer for $152000. Teal Mountain uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1000000 miles over its 12-year useful life. Salvage value is estimated to be $16000. If the truck is driven 76000 miles in its first year, how much depreciation expense should Teal Mountain record? O $11721. O $10336. O $11552. O $9589. Save for Later Attempts: 0 of 1 used Submit Answer
Show Attempt History Current Attempt in Progress Metlock Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $121,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $43,500. The new equipment can be bought for $173,440, including installation. Over its 10-year life, it will reduce operating expenses from $190,600 to $148,700 for the first six years, and from $202,600 to $191,800 for the last four years. Net working capital requirements will also increase by $20,900 at the time of replacement. It is estimated that the company can sell the new equipment for $24,100 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an average-risk project. The…