HH purchased new shelving for its store on April 1, 2018. The shelving is expected to have a 20-year life and no residual value. The following expenditures were associated with the purchase. Cost of the shelving……………………… $12,000 Fright charges………………………………… 520 Installation of shelving…………………. 2,700 Cost to repair shelf damaged during installation…. 400 I must do Compute depreciation expense for the year 2018 through 2021 under each depreciation listed below. - Straight line, with fractional years rounded to the nearest whole month - 200 percent declining balance, using half year convention - 150 percent declining balance using half year conventiona. a.Hill Hardware has two conflicting objectives. Management wants to report the highest possible earning in its financial statement, yet it also wants to minimize its taxable income reported to the IRS. Explain how both these objectives can be met.b b.Which of the depreciation method applied in part a will result the lowest reported book value at the end of 2021? Is book value an estimated of an assets fair value? Explain please. 1.Assume that Hills Hardware sold the old shelving that was being replaced. The old shelving had originally cost $9,000. It books value at the time of the sale was $400. Record the sale of the old shelving under the following conditions. The shelving was sold for $1,100 cash. the shelving was sold for $175 cash.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
HH purchased new shelving for its store on April 1, 2018. The shelving is expected to have a 20-year life and no residual value. The following expenditures were associated with the purchase.
Cost of the shelving……………………… $12,000
Fright charges………………………………… 520
Installation of shelving…………………. 2,700
Cost to repair shelf damaged during installation…. 400
I must do
Compute
- Straight line, with fractional years rounded to the nearest whole month
- 200 percent declining balance, using half year convention
- 150 percent declining balance using half year conventiona.
- a.Hill Hardware has two conflicting objectives. Management wants to report the highest possible earning in its financial statement, yet it also wants to minimize its taxable income reported to the IRS. Explain how both these objectives can be met.b
- b.Which of the depreciation method applied in part a will result the lowest reported book value at the end of 2021? Is book value an estimated of an assets fair value? Explain please.
- 1.Assume that Hills Hardware sold the old shelving that was being replaced. The old shelving had originally cost $9,000. It books value at the time of the sale was $400. Record the sale of the old shelving under the following conditions.
- The shelving was sold for $1,100 cash.
- the shelving was sold for $175 cash.
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