Estimated Useful Life of Purchase Price & Estimated Salvage Assets Value Years 20 16 12 0 Building Equipment Truck Year 1 Production Year 2 Production Year 3 Production Year 4 Production Actual $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 25,000 Building Equipment Actual & Estimated Units-of-Production Purchase Salvage Purchase Salvage Purchase Salvage Price Value Price Value Price Value Estimated 50,000 75,000 Total Units to be Produced Truck Estimated 100,000 Estimated 125,00
The company founder hires us as consultants and asks that we oversee the accounting for new equipment purchased on January 1. The founder wants to know the implications of different
1(a). Assume the company uses straight-line depreciation for the equipment. At the beginning of the second year, we determine that the equipment has only two more years of remaining useful life. Compute the equipment’s book value at the end of its first year.
1(b). Assume the company uses straight-line depreciation for the equipment. At the beginning of the second year, we determine that the equipment has only two more years of remaining useful life. Compute the depreciation for the second year given the revised useful life estimate.
2. At the end of the equipment’s useful life, the company plans to sell it. Record the sale of equipment at the end of its useful life for (a) $12,000 cash and (b) $6,000 cash.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
