The cost of equipment purchased by Bramble, Inc., on June 1, 2020, is $92.400. It is estimated that the machine will have a$8,400 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,000,and its total production is estimated at 600,000 units. During 2020, the machine was operated 6,900 hours and produced63,200 units. During 2021, the machine was operated 6,320 hours and produced 55,200 units.Compute depreciation expense on the machine for the year ending December 31, 2020, and the year ending December 31, 2021,using the following methods. (Round depreciation per unit to 2 decimal places, eg. 15.25 and final answers to 0 decimal places, e.g. 45,892.)20202021(a)Straight-line(b)Units-of-output(c)Working hours(d)Sum-of-the-years-digits(e)Double-declining-balance (twice the straight-line rate)%24%4%24%24%24%24%24%24%24

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sweet Manufacturing purchased a machine on August 1, 2023 for use in its factory. Sweet paid $549,600 for the machine and estimated that it had a useful life of 10 years, at the end of which time the machine was expected to have a residual value of $48,000. During its life, the machine was expected to produce 264,000 units. During 2023, the machine produced 26,000 units, and produced 40,000 in 2024. The machine was subject to a 20% CCA rate, and Sweet's year-end was December 31. The machine is eligible for the Accelerated Investment Incentive. Calculate the annual depreciation amount for 2023 and 2024 using the Capital Cost Allowance method. Please ensure that your answer is correct.
Crane Company purchases an oil tanker depot on January 1, 2020, at a cost of $639,700. Crane expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $69,980 to dismantle the depot and remove the tanks at the end of the depot's useful life. (a) Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2020. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2020, is $39,076. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1, 2020 (To record the depot) January 1, 2020 (To record the asset retirement obligation) eTextbook and Media
Grove Co. acquired a production machine on January 1, 2019, at a cost of $550,000. The machine is expected to have a four-year useful life, with a salvage value of $108,000. The machine is capable of producing 78,000 units of product in its lifetime. Actual production was as follows: 17,160 units in 2019: 24,960 units in 2020; 21,840 units in 2021; 14,040 units in 2022. Following is the comparative balance sheet presentation of the net book value of the production machine at December 31 for each year of the asset's life, using three alternative depreciation methods (items o-c): Required: Identify the depreciation method used for each of the following comparative balance sheet presentations (items a-c). If a declining- balance method is used, be sure to indicate the percentage (150 % or 200%). (Hint: Read the balance sheet from right to left to determine how much has been depreciated each year. Remember that December 31, 2019, is the end of the first year.) a. b. Depreciation Method…
Storm Delivery Company purchased a new delivery truck for $69,000 on April 1, 2019. The truck is expected to have a service life of 10 years or 150,000 miles and a residual value of $3,000. The truck was driven 8,000 miles in 2019 and 20,000 miles in 2020. Storm computes depreciation expense to the nearest whole month. For each method, what is the book value of the machine at the end of 2019? At the end of 2020? (Round your answers to the nearest dollar.) Straight-line method 2019 $ fill in the blank 2020 $ fill in the blank Sum-of-the-years'-digits method 2019 $ fill in the blank 2020 $ fill in the blank
Wardell Company purchased a minicomputer on January 1, 2022, at a cost of $57,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $6,000. On January 1, 2024, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $1,200. Required: 1. Prepare the year-end journal entry for depreciation on December 31, 2024. No depreciation was recorded during the year. Record depreciation expense for 2024. Event General Journal Debit Credit 1 Depreciation expense 4,425 Accumulated depreciation—computer 4,425 Prepare the year-end journal entry for depreciation on December 31, 2024. Assume that the company uses the double-declining-balance method instead of the straight-line method. Event General Journal Debit Credit 1 Depreciation…
Birkey Company purchased equipment on January 1, 2020, at a total cost of $99,000. The machinery’s estimated useful life is 8 years or 60,000 hours, and its residual value is $9,000. During 2020 and 2021, the machinery was used 7,000 and 8,00 hours, respectively. Calculate the depreciation expense for 2020 using the units-of-production method. Show your calculations Blank 1. Fill in the blank, read surrounding text. 2020 Depreciation Expense Units-of-Production Method Blank 2. Fill in the blank, read surrounding text.
Crane Company purchases an oil tanker depot on January 1, 2020, at a cost of $639,700. Crane expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $69,980 to dismantle the depot and remove the tanks at the end of the depot's useful life. (a) Your answer is partially correct. Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2020. Based on an effective-interest rate of 6%, the present value required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) the asset retirement obligation on January 1, 2020, is $39,076. (If no entry is Date Account Titles and Explanation Debit Credit January 1, depot 2020 639700 Cash 639700 (To record the depot) January 1, 2020 depot 39076 Asset Retirement…
On January 1, 2021 the Hogan Manufacturing Company purchased a machine for $250,000. The company expects the service life of the machine to be 5 years and its anticipated residual value to be $40,000. The company's financial year end is December 31 and the straight line method is used for all depreciable assets. Jan 1, 2023, the company revised its estimate of service life from 5 to 8 years and also revised its estimated residual value to be $22,000. Required: Calculate depreciation for 2023
The initial cost of the machine including its installation is 930,000. The expected life of the machine is 13 years for depreciation. The estimated salvage value of the equipment is 66,000 and the cost of dismantling is 22,000. Using the Declining Balance Method, what is the annual depreciation charge and what is the book value of the machine at the end of the eight year.
On December 31, 2020, a company invested $2,150,000 in an asset. The company estimates that 3,000,000 tonnes will be excavated over the 20 year life of the asset. In order to decommission the asset at the end of the useful life it is estimated that it will cost $485,000. The depreciation method is based on units of production method. The relevant discount rate is 6%. A total of 220,000 tonnes and 205,000 tonnes were excavated in 2021 and 2022 respectively. Required Prepare all journal entries required for the years ended December 31, 2020, 2021 and 2022. (HINT: include the original purchase journal entry and subsequent depreciation and interest entries.)
On October 1, 2021, the Allegheny Corporation purchased equipment for $123,000. The estimated service life of the equipment is 10 years and the estimated residual value is $2,000. The equipment is expected to produce 220,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. Double-declining-balance. Double-Declining-Balance Method Choose Numerator: x Choose Denominator: x Fraction of = Depreciation Expense Formula Beginning Book Value x Double the Straight-line Rate x Fraction of Year = Depreciation Amount for 2021 $ _________________ x __________________ % x _____________ = _________ Amount for 2022 $_________________ x…
Grove Company acquired a production machine on January 1, 2022, at a cost of $540,000. The machine is expected to have a four- year useful life, with a salvage value of $104,000. The machine is capable of producing 74,000 units of product in its lifetime. Actual production was as follows: 16,280 units in 2022; 23,680 units in 2023; 20,720 units in 2024; 13,320 units in 2025. Following is the comparative balance sheet presentation of the net book value of the production machine at December 31 for each year of the asset's life, using three alternative depreciation methods (items a to c): Required: Identify the depreciation method used for each of the following comparative balance sheet presentations (items a to c). If a declining- balance method is used, be sure to indicate the percentage (150% or 200%). (Hint: Read the balance sheet from right to left to determine how much has been depreciated each year. Remember that December 31, 2022, is the end of the first year.) a. b. C. Production…

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