5 During the construction of a highway bypass, earth- moving equipment costing $40,000 was purchased for use in transporting fill from the borrow pit, At the end of the 4-year project, the equipment will be sold for $20,000. The schedule for moving fill calls for a total of 100,000 cubic feet during the project. In the first year, 40% of the total fill is required; in the second year, 30%; in the third year, 25%; and in the final year, the remaining 5%. Determine the units-of-production depreciation schedule for the equipment.
Q: A new operations system requires an initial investment of $100,000 and will generate $70,000 in…
A:
Q: The Transportation Service Directorate of a Municipality wants to purchase a new software system to…
A: Capitalization cost means total cost incurred in the project or investment. Some part of the cost…
Q: Khamsah Mining Company has purchased a tract of mineral land for $900,000. It is estimated that this…
A: The depletion and depreciation is the reduction in the book value of the asset due to the use or…
Q: Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one…
A: Depletion is the reduction in value of natural resources over the period of time. This is charged as…
Q: The Public Service Board (PSB) awarded two contracts worth a combined $3.07 million to increase the…
A: Calculation of savings if bids were lower than estimated is shown below: Hence, annual worth of…
Q: Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,300,000 in…
A: Total Cost of Copper Mines = Cash Paid for Mining site + Additional Development cost + Restoration…
Q: The Arkansas Division of ADM, a large agricultural products corporation, purchased a…
A: The value to determine the economic analysis of the current asset (defender) is the current market…
Q: Proposal 1 requires dredging the canal. The state is planning to purchase the dredging equipment and…
A: Annual Worth (AW) is easy to understand by anyone familiar with annual amounts because for example,…
Q: Burling Water Cooperative currently contracts the removal of small amounts of hydrogen sulfide from…
A: Replacement decisions are taken based on the present value of all the cash flows during the life of…
Q: A municipality is planning on constructing a water treatment plant at an initial cost of…
A: Capital cost is the cost which is required to purchase an equipment. It also includes the repair…
Q: ackpot Mining Company operates a copper mine in central Montana. The company paid $1,900,000 in 2021…
A: A journal entry is used to record a business transaction int he accounting records of a business.
Q: An Engineer makes the following cost estimates for each: A: Concrete Bleachers: First cost,…
A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…
Q: Determine the cost of the copper mine. 2. Prepare the journal entries to record the acquisition…
A: Computation of Cost of Copper Mine Particular Amount Cash Paid for Mining site $1,000,000…
Q: Required: 1. Compute depletion and depreciation on the mine and mining equipment for 2021 and 2022.…
A: Jackpot Mining Company operates a copper mine in central Montana. The company expects to extract…
Q: Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years a vacant lot next…
A: Given:: Area= 12000 sq. yard Working Notes (WN): WN # 1 Bid A Installation cost…
Q: The Camino Real Landfill was required to install a plastic liner to prevent leachate from migrating…
A: Computation:
Q: he Arkansas Division of ADM, a large agricultural products corporation, purchased a state-of-the-art…
A: A replacement decision is a financial decision where management eliminates old product and…
Q: A bulk-water supplier has been awarded by a city to supply their potable water for the next 10…
A:
Q: A state government is considering construction of a flood control dike having a life span of 15…
A:
Q: A contractor has a 4-year concrete mixer whose first cost was $6,000, having 3 more years to live…
A: Annual Equivalent cost of the machine can be computed by dividing the present value of the machine…
Q: A city government is considering two types oftown-dump sanitary systems. Design A requires aninitial…
A: The relation between the relative cost and benefits of the various investment proposals are analyzed…
Q: To decrease the costs of operating a lock in a large river, a new system ofoperation is proposed.…
A: There are a number of different pieces that are in play that must be factored in and be properly in…
Q: The York City Hospital has just acquired new equipment. The equipment cost $4,250,000, and the new…
A: Depreciation in accounting means decrease in the value of assets over useful life. it is a process…
Q: Underwood’s Miners recently purchased the rights to a diamond mine. It is estimated that there are…
A: Depletion expense = Cost * Extracted for the year / Total Extraction from the mine
Q: 1. This project must fund the construction of an on/off-interchange from an adjacent highway, a…
A: Step1: Calculating the amount will need to be funded today to meet the complete funding requirements…
Q: Company A decided to build a road. The duration of the project was 4 years and the fee amounts to €…
A:
Q: A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual…
A: Computation of EUAC of existing and new mixer using insider's view point approach:Hence, the EUAC of…
Q: Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years a vacant lot next…
A: Calculation of present value outflows: Answer: Present value outflows for Bid A is $129,881.21…
Q: The Highway Department expects the cost of maintenance for a piece of heavy construction equipment…
A: The value of money varies with time, therefore the time value of money considers the worth of the…
Q: A one-mile section of a roadway in Florida has been washed out by heavy rainfall. The county is…
A: The discount rate, or MARR, imposes a condition of minimum profitability that a project or project…
Q: During the construction of a highway bypass, earth moving equipment costing P400,000 was purchased…
A: The question is based on the concept of Depreciation Accounting.
Q: The owners of a new planned unit development have installed a package sewage frealment plant that…
A: The Net Present Worth: The net present worth of a project is the net of the present value of cash…
Q: hich is the most economical plan if the interest rate is 12%
A: Proposal A Initial Cost 2,750,000 Life 40 years Annual Operating cost 5,000 Rate of…
Q: The Drilling Corp. owns drilling rights on a tract of land on which crude oil has been discovered.…
A: To evaluate the project, Net Present Value method will be used. Net present value method is defined…
Q: . At the end of the 4-year project, the equipment will be sold for P200,000. The schedule for moving…
A: Original Cost of Asset=$40,000Salvage value=$20,000Life of Asset=4 yearsTotal Production=100,000…
Q: A local county government is considering purchasing some dump trucks for thetrash pickups. Each…
A: Time period is denoted by n, and interest rate is denoted by i, annual fee (AF) can be calculated as…
Q: The city of Zamboanga contemplates to increase the capacity of their existing water transmission…
A: PW or NPV is the method to find the net benefit which can be generated from the future cashflows. It…
Q: A quarry outside of Austin, Texas, wishes to evaluate two similar pieces of equipment by which the…
A: a. year X Y 0 -40,000 -75000 1 -25000 -15000 2 -25000 -15000 3 -25000 -15000 4 -15000…
Q: Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one…
A: Depletion arte per tons = (Cost of rights - Residual value) / Estimated tons of minerals =…
Q: Two alternatives are being considered for recovering aluminum from garbage. Alternative 1 has a…
A: Introduction: Present worth analysis Present worth analysis can be defined as a analysis which…
Q: A new highway is to be constructed. Design A calls for a concrete pavement costing 3600 per foot…
A:
Q: Every 10 years, the dome of the state capitol building has to be cleaned, sandblasted, and…
A: Capital cost is the the amount which is needed to make a project operational. In order to find this…
Q: BW Company has determined that it requires a new treatment facility that would clean polluted water…
A: The decision regarding the acquiring the asset or the construct the asset depends upon the various…
Q: Jackpot Mining Company operates a copper mine in central Montana. The company paid $1,900,000 in…
A: Journal entry is defined as recording of the business transactions into the books of accounts of the…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
- Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.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.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.
- St. Johns Medical Center (SJMC) has five medical technicians who are responsible for conducting cardiac catheterization testing in SJMCs Cath Lab. Each technician is paid a salary of 36,000 and is capable of conducting 1,000 procedures per year. The cardiac catheterization equipment is one year old and was purchased for 250,000. It is expected to last five years. The equipments capacity is 25,000 procedures over its life. Depreciation is computed on a straight-line basis, with no salvage value expected. The reading of the catheterization results is conducted by an outside physician whose fee is 120 per test. The technicians report with the outside physicians note of results is sent to the referring physician. In addition to the salaries and equipment, SJMC spends 50,000 for supplies and other costs needed to operate the equipment (assuming 5,000 procedures are conducted). When SJMC purchased the equipment, it fully expected to perform 5,000 procedures per year. In fact, during its first year of operation, 5,000 procedures were run. However, a larger hospital has established a clinic in the city and will siphon off some of SJMCs business. During the coming years, SJMC expects to run only 4,200 cath procedures yearly. SJMC has been charging 850 for the procedureenough to cover the direct costs of the procedure plus an assignment of general overhead (e.g., depreciation on the hospital building, lighting and heating, and janitorial services). At the beginning of the second year, an HMO from a neighboring community approached SJMC and offered to send its clients to SJMC for cardiac catheterization provided that the charge per procedure would be 550. The HMO estimates that it can provide about 500 patients per year. The HMO has indicated that the arrangement is temporaryfor one year only. The HMO expects to have its own testing capabilities within one year. Required: 1. Classify the resources associated with the cardiac catheterization activity into one of the following: (1) committed resources, or (2) flexible resources. 2. Calculate the activity rate for the cardiac catheterization activity. Break the activity rate into fixed and variable components. Now, classify each activity resource as relevant or irrelevant with respect to the following alternatives: (1) accept the HMO offer, or (2) reject the HMO offer. Explain your reasoning. 3. Assume that SJMC will accept the HMO offer if it reduces the hospitals operating costs. Should the HMO offer be accepted? 4. Jerold Bosserman, SJMCs hospital controller, argued against accepting the HMOs offer. Instead, he argued that the hospital should be increasing the charge per procedure rather than accepting business that doesnt even cover full costs. He also was concerned about local physician reaction if word got out that the HMO was receiving procedures for 550. Discuss the merits of Jerolds position. Include in your discussion an assessment of the price increase that would be needed if the objective is to maintain total revenues from cardiac catheterizations experienced in the first year of operation. 5. Chandra Denton, SJMCs administrator, has been informed that one of the Cath Lab technicians is leaving for an opportunity at a larger hospital. She met with the other technicians, and they agreed to increase their hours to pick up the slack so that SJMC wont need to hire another technician. By working a couple hours extra every week, each remaining technician can perform 1,050 procedures per year. They agreed to do this for an increase in salary of 2,000 per year. How does this outcome affect the analysis of the HMO offer? 6. Assuming that SJMC wants to bring in the same revenues earned in the cardiac catheterization activitys first year less the reduction in resource spending attributable to using only four technicians, how much must SJMC charge for a procedure?Underwoods Miners recently purchased the rights to a diamond mine. It is estimated that there are two million tons of ore within the mine. Underwoods paid $46,000,000 for the rights and expects to harvest the ore over the next fifteen years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 900,000 tons Year 3: 400,000 tons Year 4: 210,000 tons Year 5: 150,000 tons Calculate the depletion expense for the next five years and create the journal entry for year one.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 120,000 miles. 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.
- Urquhart 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.IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, two flight simulators were purchased by a space camp for 77,000 each with a salvage value of 5,000 each and estimated useful lives of eight years. On January 1, 20-2, the hydraulic system for Simulator A was replaced for 6,000 cash and an updated computer for more advanced students was installed in Simulator B for 9,000 cash. The hydraulic system is expected to extend the life of Simulator A three years beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Simulators 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 simulator for 20-2 through 20-8.Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at 860,000 and includes computerized equipment, software, and installation. There is no expected salvage value. The new system has a useful life of 8 years and is projected to produce cash operating savings of 225,000 per year over the old system (reducing labor costs and costs of processing and disposing of toxic waste). The cost of capital is 16%. Required: 1. Compute the NPV of the new system. 2. One year after implementation, the internal audit staff noted the following about the new system: (1) the cost of acquiring the system was 60,000 more than expected due to higher installation costs, and (2) the annual cost savings were 20,000 less than expected because more labor cost was needed than anticipated. Using the changes in expected costs and benefits, compute the NPV as if this information had been available one year ago. Did the company make the right decision? 3. CONCEPTUAL CONNECTION Upon reporting the results mentioned in the postaudit, the marketing manager responded in a memo to the internal audit department indicating that cash inflows also had increased by a net of 60,000 per year because of increased purchases by environmentally sensitive customers. Describe the effect that this has on the analysis in Requirement 2. 4. CONCEPTUAL CONNECTION Why is a postaudit beneficial to a firm?
- Colquhoun 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.During the construction of a highway bypass, earth moving equipment costing P400,000 was purchased for use in transporting fill from the borrow pit. At the end of the 4-year project, the equipment will be sold for P200,000. The schedule for moving fill calls for a total of 100,000 cubic feet during the project. In the first year, 40% of the total fill is required; in the second year, 30%; in the third year 25%; and in the final year, the remaining 5%. Determine the declining balance depreciation schedule.During the construction of a highway bypass, earth moving equipment costing P400,000 was purchased for use in transporting fill from the borrow pit. At the end of the 4-year project, the equipment will be sold for P200,000. The schedule for moving fill calls for a total of 100,000 cubic feet during the project. In the first year, 40% of the total fill is required; in the second year, 30%; in the third year 25%; and in the final year, the remaining 5%. Determine the service-output depreciation schedule.