The purchase price of a front-end loader, including the tires, sales tax, and all other costs associatedwith its purchase, is $117,450. The life of the loader is 6 years, at which time it will have anestimated salvage value of $11,500. The replacement cost of the tires is $7,500 for all tires on theloader and is not to be included in the depreciation and interest cost. The loader is expected to beused 1,200 hours per year. Determine the annual depreciation and interest cost of the loader usingan interest rate of 7%.O $15.97/hrO $18.37/hrO $17.88/hrO $14.75/hr

The equipment is going to be decrease in value and with use of equipment annually the value of…

Answered: he purchase price of a front vith its…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 4EB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is...

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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.
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.
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.
Montezuma 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. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After three years of recording depreciation, Montezuma determines that the delivery truck will only be useful for another three years and that the salvage value will increase to $4,000. Determine the depreciation expense for the final three years of the assets life, and create the journal entry for year four.
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.
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. Montello uses the straight-line depreciation method. Calculate the annual depreciation expense.
Utica Machinery Company purchases an asset for 1,200,000. After the machine has been used for 25,000 hours, the company expects to sell the asset for 150,000. What is the depreciation rate per hour based on activity?
Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and is expected to be driven for ten years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After five years of recording depreciation, Montezuma determines that the delivery truck will be useful for another five years (ten years in total, as originally expected) and that the salvage value will increase to $10,000. Determine the depreciation expense for the final five years of the assets life, and create the journal entry for years 6â€“10 (the entry will be the same for each of the five years).
The 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?

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