Problem 4 – Depreciation and DisposalOn Jan. 1, 2020, Forsyth Co. acquired a unit of equipment for a total cost of P5,000,000. The entity estimates that duringits 10-year useful life, the equipment will be able to produce 500,000 units of its product for 40,000 working hours, andwill be sold forscrap.The usage of the equipment from 2020 to 2023 is as follows:Units ProducedHours Used202032,0002,500202140,0003,250202245,0004,200202360,0004,500On Jan. 1, 2024, the equipment was sold for P3,250,000.1. Using the units of output depreciation method:Determine the 2021 depreciation expenseDetermine the carrying value on December 31, 2022Determine the gain or loss on disposal on January 1, 2024а.b.с.2. Using the working hours depreciation method:Determine the 2021 depreciation expenseb. Determine the carrying value on December 31, 2022Determine the gain or loss on disposal on January 1, 2024а.с.

Depreciation as per Units of product method - = Depreciation per unit * Number of units produced…

Answered: Problem 4 - Depreciation and Disposal…

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 71BPSB: Depreciation Schedules Dunn Corporation acquired a new depreciable asset for $135,000. The asset has...

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(Appendix 11.1) Depreciation for Financial Statements and Income Tax Purposes Dinkle Company purchased equipment for 50,000. The equipment has an estimated residual value of 5,000 and an expected useful life of 10 years. Dinkle uses straight-line depreciation for its financial statements. Required: What is the difference between the companys income before taxes reported on its financial statements and the taxable income reported on its tax return in each of the first 2 years of the assets life if the asset was purchased on January 2, 2019, and its MACRS life is 5 years?
Depreciation Methods On January 1, 2019, Loeffler Company acquired a machine at a cost of $200,000. Loeffler estimates that it will use the machine for 4 years or 8,000 machine hours. It estimates that after 4 years the machine can be sold for $20,000. Loeffler uses the machine for 2,100 and 1,800 machine hours in 2019 and 2020, respectively. Required: Compute depreciation expense for 2019 and 2020 using the (1) straight-line, (2) double-declining-balance, and (3) units-of-production methods of depreciation.
Change in Estimate Assume that Bloomer Company purchased a new machine on January 1, 2016, for $80,000. The machine has an estimated useful life of nine years and a residual value of $8,000. Bloomer has chosen to use the straight-line method of depreciation. On January 1, 2018, Bloomer discovered that the machine would not be useful beyond December 31, 2021, and estimated its value at that time to be $2,000. Required Calculate the depreciation expense, accumulated depreciation, and book value of the asset for each year 2016 to 2021. Was the depreciation recorded wrong in 2016 and 2017? If so, why was it not corrected?
Depreciation Schedules Dunn Corporation acquired a new depreciable asset for $135,000. The asset has a 5-year expected life and a residual value of zero. Required: 1. Prepare a depreciation schedule for all 5 years of the assets expected life using the straight-line depreciation method. 2. Prepare a depreciation schedule for all 5 years of the assets expected life using the double-declining-balance depreciation method. 3. CONCEPTUAL CONNECTION What questions should be asked about this asset to decide which depreciation method to use?
Chapman Inc. purchased a piece of equipment in 2018. Chapman depreciated the equipment on a straight-line basis over a useful life of 10 years and used a residual value of $12,000. Chapmans depreciation expense for 2019 was $11,000. What was the original cost of the building? a. $98,000 b. $110,000 c. $122,000 d. $134,000
Depreciation Methods Sorter Company purchased equipment for 200,000 on January 2, 2019. The equipment has an estimated service life of 8 years and an estimated residual value of 20,000. Required: Compute the depreciation expense for 2019 under each of the following methods: 1. straight-line 2. sum-of-the-years-digits 3. double-declining-balance 4. Next Level What effect does the depreciation of the equipment have on the analysis of rate of return?
Depreciation Methods Nickle Company purchased three identical assets for 17,000 on January 2, 2019. Each asset has an expected residual value of 1,000. The depreciation expense for 2019 and 2020 is shown below for three assets: Required: 1. Next Level Which depreciation method is the company using for each asset? 2. Compute the depreciation expense for 2021 and 2022 for each asset.

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