Nicole’s Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programsat NGS. The machine was purchased at the beginning of the year at a cost of $7,000. The estimateduseful life was five years and the residual value was $500. Assume that the estimated productivelife of the machine is 13,000 hours. Expected annual production was year 1, 3,100 hours; year 2,2,500 hours; year 3, 3,400 hours; year 4, 2,200 hours; and year 5, 1,800 hours.Required:1. Complete a depreciation schedule for each of the alternative methods.a. Straight-line.b. Units-of-production.c. Double-declining-balance.2. Assume NGS sold the hydrotherapy tub system for $2,100 at the end of year 3. Prepare the journal entry to account for the disposal of this asset under the three differentmethods.3. The following amounts were forecast for year 3: Sales Revenues $42,000; Cost of GoodsSold $33,000; Other Operating Expenses $4,000; and Interest Expense $800. Create anincome statement for year 3 for each of the different depreciation methods, ending atIncome before Income Tax Expense. (Don’t forget to include a loss or gain on disposal foreach method.)
Nicole’s Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs
at NGS. The machine was purchased at the beginning of the year at a cost of $7,000. The estimated
useful life was five years and the residual value was $500. Assume that the estimated productive
life of the machine is 13,000 hours. Expected annual production was year 1, 3,100 hours; year 2,
2,500 hours; year 3, 3,400 hours; year 4, 2,200 hours; and year 5, 1,800 hours.
Required:
1. Complete a
a. Straight-line.
b. Units-of-production.
c. Double-declining-balance.
2. Assume NGS sold the hydrotherapy tub system for $2,100 at the end of year 3. Prepare the
methods.
3. The following amounts were
Sold $33,000; Other Operating Expenses $4,000; and Interest Expense $800. Create an
income statement for year 3 for each of the different depreciation methods, ending at
Income before Income Tax Expense. (Don’t forget to include a loss or gain on disposal for
each method.)
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