PROBLEM 17-1A At the beginning of a fiscal year, Flowers Company buys a truck for $28,000. The truck's estimated life is five years, and its estimated salvage value is $3,000. Required Using the following four methods, determine the annual depreciation of the truck for each of the estimated five years of life, the accumulated depreciation at the end of each and the book value of the truck at the end of each year. Round annual depreciation year, to whole dollars. a. Straight-line method b. Double-declining-balance method c. Units-of-production method (Useful life is 100,000 miles. Year1 use is 10,000 miles, Year 2 use is 20,000 miles, Year 3 use is 40,000 miles, Year 4 use is 18,000 miles, and Year 5 use is 12,000 milęs.) Round depreciation per unit to two decimal places. Year 5 depreciation should be rounded to balance. d. MACRS method (Assume that the asset was purchased after 1986 and is five-year property.) Year 6 depreciation should be rounded to balance.

PROBLEM 17-1A At the beginning of a fiscal year, Flowers Company buys a truck for $28,000. The truck's estimated life is five years, and its estimated salvage value is $3,000. Required Using the following four methods, determine the annual depreciation of the truck for each of the estimated five years of life, the accumulated depreciation at the end of each and the book value of the truck at the end of each year. Round annual depreciation year, to whole dollars. a. Straight-line method b. Double-declining-balance method c. Units-of-production method (Useful life is 100,000 miles. Year1 use is 10,000 miles, Year 2 use is 20,000 miles, Year 3 use is 40,000 miles, Year 4 use is 18,000 miles, and Year 5 use is 12,000 milęs.) Round depreciation per unit to two decimal places. Year 5 depreciation should be rounded to balance. d. MACRS method (Assume that the asset was purchased after 1986 and is five-year property.) Year 6 depreciation should be rounded to balance.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

22nd Edition

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:James A. Heintz, Robert W. Parry

Chapter18: Accounting For Long-term Assets

Section: Chapter Questions

Problem 3CE

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(Appendix 11.1) Auburn Company purchased an asset on January 1, Year 1, for 150,000. The asset has a MACRS life of 7 years. The residual value of the asset is 35,000. Calculate the depreciation expense for Year 1 and Year 2 using MACRS.
Effect of depreciation on net income Tuttle Construction Co. specializes in building replicas of historic houses. Tim Newman, president of Tuttle Construction, is considering the purchase of various items of equipment on July 1, 2014, for 400,000. The equipment would have a useful life of five years and no residual value. In the past, all equipment has been leased. For tax purposes, Tim is considering depreciating the equipment, by the straight-line method. He discussed the matter with his CPA and learned that, although the straight-line method could be elected, it was to his advantage to use the Modified Accelerated Cost Recovery System (MACKS) for tax purposes, lie asked for your advice as to which method to use for tax purposes. 1. Compute depreciation for each of the years (2014, 2015, 2016, 2017, 2018, and 2019) of useful life by (a) the straight-line method and (b) MACRS. In using the straight-line method, one-half year's depreciation should be computed for 2014 and 2019.Use the MACRS rates presented in Exhibit 9. 2. Assuming that income before depreciation and income tax is estimated to be 750,000 uniformly per year and that the income tax rate is 40%, compute the net income for each of the years 2014, 2015, 2016, 2017, 2018, and 2019 if (a) the straight-line method is used and (b) MACRS is used. 3. What factors would you present for Tim's consideration in the selection of a depreciation method?
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