Example A machine with a cost of $200 000 & useful life of 8 years was acquired at the beginning of year 1. The machine is revalued every 2 years and the revaluation reserve will be regarded as realised only when the machine is sold. The net replacement cost of the machine was as follows; Beginning of year 3 Beginning of year 5 Beginning of year 7 $160 000 $95 000 $50 000 How will the revaluation increases/decreases be accounted for?

Example A machine with a cost of $200 000 & useful life of 8 years was acquired at the beginning of year 1. The machine is revalued every 2 years and the revaluation reserve will be regarded as realised only when the machine is sold. The net replacement cost of the machine was as follows; Beginning of year 3 Beginning of year 5 Beginning of year 7 $160 000 $95 000 $50 000 How will the revaluation increases/decreases be accounted for?

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Description: • ExampleA machine with a cost of $200 000 & useful life of 8 yearswas acquired at the beginning of year 1. The machine isrevalued every 2 years and the revaluation reserve will beregarded as realised only when the machine is sold. The netreplacemen

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section9.A: Depreciation

Problem 5P

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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. Dunedin buys equipment frequently and wants to print a depreciation schedule for each assets life. Review the worksheet called DEPREC that follows these requirements. Since some assets acquired are depreciated by straight-line, others by units of production, and others by double-declining balance, DEPREC shows all three methods. You are to use this worksheet to prepare depreciation schedules for the new machine.
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.
IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, Dans Demolition purchased two jackhammers for 2,500 each with a salvage value of 100 each and estimated useful lives of four years. On January 1, 20-2, a stronger blade to improve performance was installed in Jackhammer A for 800 cash and the compressor was replaced in Jackhammer B for 200 cash. The compressor is expected to extend the life of Jackhammer B one year beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Jackhammers 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 jackhammer for 20-2 through 20-4.
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