In recent years, Pina Colada Company has purchased three machines. Because of frequent employee turnover in the accountingdepartment, a different accountant was in charge of selecting the depreciation method for each machine, and various methods havebeen used. Information concerning the machines is summarized in the table below.SalvageUseful LifeDepreciationMachineAcquiredCostValue(in years)Method1Jan. 1, 2020$ 100,100$ 12,5008Straight-line2July 1, 202192,00010,0005Declining-balanceNov. 1, 2021123,0009,0006Units-of-activityFor the declining-balance method, Pina Colada Company uses the double-declining rate. For the units-of-activity method, totalmachine hours are expected to be 38,000. Actual hours of use in the first 3 years were 2021, 600; 2022, 4,200; and 2023, 7,300. For Machine #3, calculate depreciable cost per hour under units-of-activity method.Depreciable costper hour%24

Name: In recent years, Pina Colada Company has purchased three machines. Be
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Description: In recent years, Pina Colada Company has purchased three machines. Because of frequent employee turnover in the accountingdepartment, a different accountant was in charge of selecting the depreciation method for each machine, and various methods hav

Depreciable cost = (Cost - Salvage value)/Total machine hours

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In recent years, Pina Colada Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Salvage Useful Life Depreciation Machine Acquired Cost Value (in years) Method 1 Jan. 1, 2020 $ 100,100 $ 12,500 8. Straight-line July 1, 2021 92,000 10,000 5 Declining-balance 3 Nov. 1, 2021 123,000 9,000 Units-of-activity For the declining-balance method, Pina Colada Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 38,000. Actual hours of use in the first 3 years were 2021, 600; 2022, 4,200; and 2023, 7,300.

In recent years, Pina Colada Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Salvage Useful Life Depreciation Machine Acquired Cost Value (in years) Method 1 Jan. 1, 2020 $ 100,100 $ 12,500 8. Straight-line July 1, 2021 92,000 10,000 5 Declining-balance 3 Nov. 1, 2021 123,000 9,000 Units-of-activity For the declining-balance method, Pina Colada Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 38,000. Actual hours of use in the first 3 years were 2021, 600; 2022, 4,200; and 2023, 7,300.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 3MCQ: When depreciation is recorded each period, what account is debited? a. Depreciation Expense b. Cash...

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When depreciation is recorded each period, what account is debited? a. Depreciation Expense b. Cash c. Accumulated Depreciation d. The fixed asset account involved Use the following information for Multiple-Choice Questions 7-4 through 7-6: Cox Inc. acquired a machine for on January 1, 2019. The machine has a salvage value of $20,000 and a 5-year useful life. Cox expects the machine to run for 15,000 machine hours. The machine was actually used for 4,200 hours in 2019 and 3,450 hours in 2020.
Loban Company purchased four cars for 9,000 each and expects that they will be sold in 3 years for 1,500 each. The company uses group depreciation on a straight-line basis. Required: 1. Prepare journal entries to record the acquisition and the first years depreciation expense. 2. If one of the cars is sold at the beginning of the second year for 7,000, what journal entry is required?
On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.
During the current year, Arkells Inc. made the following expenditures relating to plant machinery. Renovated seven machines for $250,000 to improve efficiency in production of their remaining useful life of eight years Low-cost repairs throughout the year totaled $79,000 Replaced a broken gear on a machine for $6,000 A. What amount should be expensed during the period? B. What amount should be capitalized during the period?
Albany Corporation purchased equipment at the beginning of Year 1 for 75,000. The asset does not have a residual value and is estimated to be in service for 8 years. Calculate the depreciation expense for Years 1 and 2 using the double-declining-balance method. Round to the nearest dollar.
Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.
To test your formulas, assume the machine purchased had an estimated useful life of three years (20,000, 30,000, and 50,000 hours, respectively). Enter the new information in the Data Section of the worksheet. Does your depreciation total 320,000 under all three methods? There are three common errors made by students completing this worksheet. Lets clear up two of them. One, an asset that has a three-year life should have no depreciation claimed in Year 4. This can be corrected using an =IF statement in Year 4. For example, the correct formula in cell C32 is =IF(B32D9,0,(D7D8)/D9) or =IF(B32D9, 0, SLN(D7, D8, D9)). You may wish to edit what you have already entered rather than retype it. Two, as mentioned in requirement 2, the double-declining-balance calculation needs to be modified in the last year of the assets life. Assuming you have already modified the formula for Year 4 (per instructions in step 2), alter the formula for Year 3 also. If you corrected any formulas, test their correctness by trying different estimated useful lives (between 3 and 8) in cell E9. Then reset the Data Section to the original values, save the revised file as DEPREC2, and reprint the worksheet to show the correct formulas. The third common error doesnt need to be corrected in this problem. The general form of the double-declining-balance formula needs to be modified to check the net book value of the asset each year to make sure it does not go below salvage value. =DDB does this automatically, but if you are writing your own formulas, this gets very complicated and is beyond the scope of the problem.