Faye, Inc. finished constructing its factory on Jan. 1, 2012 at a total cost of P80,000,000. The factory has an estimated useful life of 40 years with no residual value. On Jan. 1, 2021, Faye replaced the walls on one of the areas of the factory at a total cost of P10,000,000. The estimates reveal that the cost allocated to the walls is P5,000,000. This improvement will increase the life of factory by 5 years. How much is the Loss on Replacement to be recognized on Jan. 1, 2021?
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Faye, Inc. finished constructing its factory on Jan. 1, 2012 at a total cost of P80,000,000. The factory has an estimated useful life of 40 years with no residual value. On Jan. 1, 2021, Faye replaced the walls on one of the areas of the factory at a total cost of P10,000,000. The estimates reveal that the cost allocated to the walls is P5,000,000. This improvement will increase the life of factory by 5 years. How much is the Loss on Replacement to be recognized on Jan. 1, 2021?
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- During the current year, Arkells Inc. made the following expenditures relating to plant machinery. Renovated five machines for $100,000 to improve efficiency in production of their remaining useful life of five years Low-cost repairs throughout the year totaled $70,000 Replaced a broken gear on a machine for $10,000 A. What amount should be expensed during the period? B. What amount should be capitalized during the period?Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)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.
- 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.On January 1, 2014, Courier Inc. purchased new equipment that had a total cost (including shipping and installation) of $79,000. The equipment is expected to have a useful life of four years or produce a total of 119,000 units. At the end of its life, the equipment is expected to have a residual value of $4,400. The equipment is expected to produce 28,560 units in 2014; 30,940 units in 2015; 33,320 units in 2016; and 26,180 units in 2017. Courier Inc.'s fiscal year ends on December 31. In the table below, fill in the missing depreciation expense and accumulated depreciation amounts using the straight-line, double-declining-balance, and units-of-production methods. Do not round your intermediate calculation. When required, round your answers to the nearest dollar. Cost$79,000 Depreciation Expense Accumulated Depreciation Year Straight-lineMethod Double-Declining-Balance Method Unit-of-ProductionMethod Straight-lineMethod Double-Declining-Balance Method Unit-of-ProductionMethod…On January 1, 1990, Alamo Steel Company purchased three used delivery trucks at a total cost of P630,000. Before placing the trucks in service, the company spent P22,000 painting them, P8,000 replacing their tires, and P40,000 overhauling their engines and reconditioning their bodies. Alamo management estimates that the trucks will remain in service for six years and have a residual value of P160,000. The trucks’ combined annual mileage is expected to be 18,000 miles in each of the first 4 years and 14,000 miles in each of the next two years. a) Prepare a depreciation schedule using double declining balance and using service output method b) What is the book value of the trucks at the end of 1993 using the straight line method.
- Flint Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, eight year life $40,000 Annual depreciation (straight line) 5,000 Annual manufacturing costs, excluding depreciation 12,400 Annual nonmanufacturing operating expenses 2,900 Annual revenue 35,400 Current estimated selling price of the machine 13,900 New Machine Cost of machines, six year life $59,000 Annual depreciation (straight line) 9,500 Estimated annual manufacturing cost, less depreciation 3,900 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1)…Ivanhoe Ltd. purchased a new machine on April 4, 2017, at a cost of $188,000. The company estimated that the machine would have a residual value of $16,000. The machine is expected to be used for 10,750 working hours during its four-year life. Actual machine usage was 1,600 hours in 2017; 2,100 hours in 2018; 2,300 hours in 2019; 2,100 hours in 2020; and 1,700 hours in 2021. Ivanhoe has a December 31 year end. Calculate depreciation for the machine under each of the following methods: Round expense per unit to 2 decimal places(1) Straight-line for 2017 through to 2021. 2017 expense $enter a dollar amount 2018 expense $enter a dollar amount 2019 expense $enter a dollar amount 2020 expense $enter a dollar amount 2021 expense $enter a dollar amount (2) Diminishing-balance using double the straight-line rate for 2017 through to 2021. 2017 expense $enter a dollar amount 2018 expense $enter a dollar amount 2019 expense…On January 2, Gannon Co. purchases and installs a new machine costing $312,000 with a five-year life and an estimated $28,000 salvage value. Management estimates the machine will produce 1,136,000 units of product during its life. Actual production of units is as follows: year 1: 245,600; year 2: 230,400; year 3: 227,000; year 4: 232,600; and year 5: 211,200. The total number of units produced by the end of year 5 exceeds the original estimate – this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.) Compute depreciation for each year (and total depreciation for all years combined) for the machine under straight-line and units-of-production depreciation methods. You will use the form for Problem 9 and then upload the form to this problem. Note: You do not have to use the area for calculating the units of production. This is just a work area. If you do use it, make sure that your final answers are put into the table with…