Principles of Accounting Volume 1
19th Edition
ISBN: 9781947172685
Author: OpenStax
Publisher: OpenStax College
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Chapter 11, Problem 8PB
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
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Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $5,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method and the expected miles per year for the five years are:
27,500 miles.
30,250 miles.
26,750 miles.
21,000 miles.
19,500 miles.
What is the depreciable cost per mile? (round to two decimal places and format per text)
Calculate the year one depreciation expense.
What is the year one book value?
Calculate the year three depreciation expense.
What is the year three book value?
Freida Company is considering an asset replacement project of replacing a control device. This old control device has been fully depreciated but can be sold for $5,000. The new control device, which is more automated, will cost $42,000. The new device’s installation and shipping costs will total $16,000. The new device will be depreciated on a straight-line basis over its 2-year economic life to an estimated salvage value of $0. The actual salvage value of this device at the end of 2-year period (That is, the market value of the device at the end of 2-year period) is estimated to be $4,000. If the replacement project is accepted, Freida will require an initial working capital investment of $2,200 (that is, adding $2,200 initially to its net working capital). During the 1st year of operations, Freida expects its annual revenue to increase from $72,800 to $90,000. After the 1st year, revenues from the replacement are expected to increase at a rate of $2,800 a year for the remainder of…
Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for eight years or 120,000 miles.
Montello uses the straight-line depreciation method. Calculate the annual depreciation expense.
Montello uses the units-of-production depreciation method and in year one it expects to use the truck for 23,000 miles. Calculate the annual depreciation expense.
Chapter 11 Solutions
Principles of Accounting Volume 1
Ch. 11 - Property, Plant, and Equipment is considered why...Ch. 11 - Which of the following would not be considered an...Ch. 11 - The legal protection that provides a company...Ch. 11 - Which of the following statements about...Ch. 11 - Ngo Company purchased a truck for $54,000. Sales...Ch. 11 - If a company capitalizes costs that should be...Ch. 11 - Depreciation of a plant asset is the process of...Ch. 11 - An accelerated depreciation method that takes more...Ch. 11 - The estimated economic life of an asset is also...Ch. 11 - The amortization process is like what other...
Ch. 11 - How are intangible assets with an indefinite life...Ch. 11 - If the market value of goodwill is found to be...Ch. 11 - Which of the following represents an event that is...Ch. 11 - Which of the following is true regarding special...Ch. 11 - The loss in value from all causes within a...Ch. 11 - What is the difference between tangible and...Ch. 11 - Define intangible assets.Ch. 11 - What is the difference between a patent and a...Ch. 11 - What is goodwill, and how is it generated?Ch. 11 - For each of the following transactions, state...Ch. 11 - What amounts should be recorded as a cost of a...Ch. 11 - Describe the relationship between expense...Ch. 11 - Define natural resources.Ch. 11 - Explain the difference between depreciation,...Ch. 11 - Explain the differences between the process of...Ch. 11 - What is goodwill, and what are the unique aspects...Ch. 11 - What are some examples of special issues in...Ch. 11 - What is the difference between functional...Ch. 11 - Fombell, Incorporated has the following assets in...Ch. 11 - Jada Company had the following transactions during...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Steele Corp. purchases equipment for $25,000....Ch. 11 - Calico Inc. purchased a patent on a new drug. The...Ch. 11 - Alfredo Company purchased a new 3-D printer for...Ch. 11 - Using the information from EA7, calculate...Ch. 11 - Santa Rosa recently purchased a new boat to help...Ch. 11 - Warriors Productions recently purchased a...Ch. 11 - The following intangible assets were purchased by...Ch. 11 - Sand River Sales has a fork truck used in its...Ch. 11 - New Carlisle, Incorporated, has the following...Ch. 11 - Johnson, Incorporated had the following...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Steele Corp. purchases equipment for $30,000....Ch. 11 - Calico Inc. purchased a patent on a new drug it...Ch. 11 - Kenzie purchased a new 3-D printer for $450,000....Ch. 11 - Using the information from EB7, calculate...Ch. 11 - Ronson recently purchased a new boat to help ship...Ch. 11 - Warriors Production recently purchased a copyright...Ch. 11 - The following intangible assets were purchased by...Ch. 11 - Baglias Wholesale Trinkets has a 3-D printer used...Ch. 11 - Selected accounts from Phipps Corporations trial...Ch. 11 - Selected accounts from Han Corporations trial...Ch. 11 - During the current year, Alanna Co. had the...Ch. 11 - During the current year, Arkells Inc. made the...Ch. 11 - Jada Company had the following transactions during...Ch. 11 - Gimli Miners recently purchased the rights to a...Ch. 11 - Tree Lovers Inc. purchased 100 acres of woodland...Ch. 11 - Referring to PA7 where Kenzie Company purchased a...Ch. 11 - For each of the following unrelated situations,...Ch. 11 - Buchanan Imports purchased McLaren Corporation for...Ch. 11 - Montezuma Inc. purchases a delivery truck for...Ch. 11 - Garcia Co. owns equipment that costs $76,800, with...Ch. 11 - Colquhoun International purchases a warehouse for...Ch. 11 - Selected accounts from Hanna Corporations trial...Ch. 11 - Selected accounts from Boxwood Corporations trial...Ch. 11 - During the current year, Alanna Co. had the...Ch. 11 - During the current year, Arkells Inc. made the...Ch. 11 - Johnson, Incorporated, had the following...Ch. 11 - Underwoods Miners recently purchased the rights to...Ch. 11 - Tree Lovers Inc. purchased 2,500 acres of woodland...Ch. 11 - Montello Inc. purchases a delivery truck for...Ch. 11 - Prepare the assets section of the balance sheet as...Ch. 11 - For each of the following unrelated situations,...Ch. 11 - On May 1, 2015, Zoe Inc. purchased Branta Corp....Ch. 11 - Farm Fresh Agriculture Company purchased Sunny...Ch. 11 - Montezuma Inc. purchases a delivery truck for...Ch. 11 - Garcia Co. owns equipment that costs $150,000,...Ch. 11 - Urquhart Global purchases a building to house its...Ch. 11 - You are an accounting student at your local...Ch. 11 - Speedy delivery service recently hired a new...Ch. 11 - Speedy Delivery has a very lazy accountant. When...Ch. 11 - Malone Industries has been in business for five...Ch. 11 - Your family started a new manufacturing business...
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- 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 it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.arrow_forwardUrquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the assets life, and create the journal entry for year eleven.arrow_forwardThe Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?arrow_forward
- Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.arrow_forwardColquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.arrow_forwardTree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete forest, leaving the land barren and worthless. Tree Lovers paid $5,000,000 for the land. Tree Lovers will sell the lumber as it is harvested and it expects to deplete it over ten years (150 acres in year one, 300 acres in year two, 250 acres in year three, 150 acres in year four, and 100 acres in year five). Calculate the depletion expense for the next five years and create the journal entry for year one.arrow_forward
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- Calligraphy Pens is deciding when to replace its old machine. The machine's current salvage value is $3,050,000. Its current book value is $1,800,000. If not sold, the old machine will require maintenance costs of $710,000 at the end of the year for the next five years. Depreciation on the old machine is $360,000 per year. At the end of five years, it will have a salvage value of $155,000 and a book value of $0. A replacement machine costs $4,650,000 now and requires maintenance costs of $380,000 at the end of each year during its economic life of five years. At the end of the five years, the new machine will have a salvage value of $745,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $3,650,000. The company will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 25 percent and the appropriate discount rate is 7 percent. The company is assumed to earn sufficient revenues to…arrow_forwardSuper Mega Business Corporation (SMBC) is purchasing a $20 million machine. It will cost $50,000 to transport and install the machine. The machine has a depreciable life of five years. It will have no salvage value. For their financial statements, SMBC always use the straight-line depreciation method. A) What are the straight-line depreciation expenses associated with this machine in year 2 after the purchase? B) What is the machine’s depreciation tax shield in year 3 after the purchase, assuming the SMBC’s marginal tax rate is 20%? C) Assume the MACRS depreciation schedule for this type of machine runs over three years and assigns the following percentage values: 20%, 50% and 30%. What is the MACRS depreciation expense in year 2? D) Assume the company can either buy the machine in January or December of the first year. Which one will generate more MACRS depreciation in the first year and why? With explanation please.arrow_forwardCalligraphy Pens is deciding when to replace its old machine. The machine's current salvage value is $2,400,000. Its current book value is $1.475,000. If not sold, the old machine will require maintenance costs of $645,000 at the end of the year for the next five years. Depreciation on the old machine is $295,000 per year. At the end of five years, it will have a salvage value of $90,000 and a book value of $0. A replacement machine costs $4,000,000 now and requires maintenance costs of $315,000 at the end of each year during its economic life of five years. At the end of the five years, the new machine will have a salvage value of $680,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $3,000,000. The company will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 22 percent and the appropriate discount rate is 7 percent. The company is assumed to earn sufficient revenues to…arrow_forward
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