Revision of Depreciation On January 1, 2021, Blizzards-R-Us purchased a snow-blowing machine for $85,000. The machine was expected to have a residual value of $5,000 at the end of its 5-year useful life. On January 1, 2023, Blizzards-R-Us concluded that the machine would have a remaining useful life of 6 years with a residual value of $770. Required: Determine the revised annual depreciation expense for 2023 using the straight-line method. $

Revision of Depreciation On January 1, 2021, Blizzards-R-Us purchased a snow-blowing machine for $85,000. The machine was expected to have a residual value of $5,000 at the end of its 5-year useful life. On January 1, 2023, Blizzards-R-Us concluded that the machine would have a remaining useful life of 6 years with a residual value of $770. Required: Determine the revised annual depreciation expense for 2023 using the straight-line method. $

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 53E: Revision of Depreciation On January 1, 2017, Blizzards-R-Us purchased a snow-blowing machine for...

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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?
Depreciation Methods Sorter Company purchased equipment for 200,000 on January 2, 2019. The equipment has an estimated service life of 8 years and an estimated residual value of 20,000. Required: Compute the depreciation expense for 2019 under each of the following methods: 1. straight-line 2. sum-of-the-years-digits 3. double-declining-balance 4. Next Level What effect does the depreciation of the equipment have on the analysis of rate of return?
Comprehensive: Acquisition, Subsequent Expenditures, and Depreciation On January 2, 2019, Lapar Corporation purchased a machine for 50,000. Lapar paid shipping expenses of 500, as well as installation costs of 1,200. The company estimated that the machine would have a useful life of 10 years and a residual value of 3,000. On January 1, 2020, Lapar made additions costing 3,600 to the machine in order to comply with pollution-control ordinances. These additions neither prolonged the life of the machine nor increased the residual value. Required: 1. If Lapar records depreciation expense under the straight-line method, how much is the depreciation expense for 2020? 2. Assume Lapar determines the machine has three significant components as shown below. If Lapar uses IFRS, what is the amount of depreciation expense that would be recorded?
Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.
Depreciation Methods On January 1, 2019, Loeffler Company acquired a machine at a cost of $200,000. Loeffler estimates that it will use the machine for 4 years or 8,000 machine hours. It estimates that after 4 years the machine can be sold for $20,000. Loeffler uses the machine for 2,100 and 1,800 machine hours in 2019 and 2020, respectively. Required: Compute depreciation expense for 2019 and 2020 using the (1) straight-line, (2) double-declining-balance, and (3) units-of-production methods of depreciation.
Cost of Asset and Depreciation Method Heist Company purchased a machine on January 2, 2019, and uses the 150%-declining-balance depreciation method. The machine has an expected life of 10 years and an expected residual value of 5,000. The following costs relate to the acquisition and use of the machine during the first year of its operations: Required: 1. Compute the depreciation expense for 2019 and 2020. 2. Next Level What is the effect on the financial statements if the company used the straight-line method instead of the 150%-declining-balance method?
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.
Depreciation Methods Nickle Company purchased three identical assets for 17,000 on January 2, 2019. Each asset has an expected residual value of 1,000. The depreciation expense for 2019 and 2020 is shown below for three assets: Required: 1. Next Level Which depreciation method is the company using for each asset? 2. Compute the depreciation expense for 2021 and 2022 for each asset.
During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the following three situations: 1. Machine A was purchased for 50,000 on January 1, 2014. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 25,000. The estimated residual value remains at 5,000, but the service life is now estimated to be 1 year longer than estimated originally. 2. Machine B was purchased for 40,000 on January 1, 2017. It had an estimated residual value of 5,000 and an estimated service life of 10 years. it has been depreciated under the double-declining-balance method for 2 years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method. 3. Machine C was purchased for 20,000 on January 1, 2018, Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value of the machine is 2,000 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 necessary for each situation to record depreciation expense for 2019.
Expenditures After Acquisition Roanoke Manufacturing placed a robotic arm on a large assembly machine on January 1, 2019. At that time, the assembly machine was expected to last another 3 years. The following information is available concerning the assembly machine. The robotic arm cost $225,000 and was expected to extend the useful life of the machine by 3 years. Therefore, the useful life of the assembly machine, after the arm replacement, is 6 years. The assembly machine is expected to have a residual value of $120,000 at the end of its useful life. Required: 1. Prepare the journal entry necessary to record the addition of the robotic arm. 2. Compute 2019 depreciation expense for the machine using the straight-line method, and prepare the necessary journal entry. 3. What is the book value of the machine at the end of 2019? 4. CONCEPTUAL CONNECTION What would have been the effect on the financial statements if Roanoke had expensed the addition of the robotic arm?
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