Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $39,000. The estimated useful life was fiveyears and the residual value was $4,000. Assume that the estimated productive life of the machine is 20,000 units. Expected annualproduction was year 1, 4,600 units; year 2, 5,600 units; year 3, 4,600 units; year 4, 4,600 units; and year 5, 600 units.Required:00:57:571. Complete a depreciation schedule for each of the alternative methods.a. Straight-line.b. Units-of-production.c. Double-declining-balance.eBook2. Which method will result in the highest net income in year 2? Does this higher net income mean the machine was used moreefficiently under this depreciation method?Complete this question by entering your answers in the tabs belowDoes this higher net income mean the machine was used more efficiently under this depreciation method?YesNoReq 2AReq 2B

The higher income means the lower depreciation expense which does not mean the asset is efficiently…

Answered: Solar Innovations Corporation bought a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Carico Company recently purchased a new machine for its factory operations at a cost of $921,250. The investment is expected to generate $250,000 in annual cash flows for a period of six years. The required rate of return is 14%. The old machine has a remaining life of six years. The new machine is expected to have zero value at the end of the six-year period. The disposal value of the old machine at the time of replacement is zero. Required: What is the internal rate of return? a. 18% b. 16% c. 15% d. 17%
Cheetah Copy purchased a new copy machine. The new machine cost $120,000 including installation. The company estimates the equipment will have a residual value of $30,000. Cheetah Copy also estimates it will use the machine for four years or about 8,000 total hours. Actual use per year was as follows: Year Hours Used 1 2,500 2 2,200 3 1,900 4 2,000 Required: 1. Prepare a depreciation schedule for four years using the straight-line method. (Do not round your intermediate calculations.) CHEETAH COPY Depreciation Schedule—Straight-Line End of Year Amounts Year Depreciation Expense Accumulated Depreciation Book Value 1 $22,500 $22,500 2 22,500 3 22,500 4 22,500 Total $90,000
Strong Metals Incorporated purchased a new stamping machine at the beginning of the year at a cost of $1,900,000. The estimated residual value was $100,000. Assume that the estimated useful life was five years and the estimated productive life of the machine was 300,000 units. Actual annual production was as follows: Year Units 1 70,000 2 67,000 3 50,000 4 73,000 5 40,000 Required: 1. Complete a separate depreciation schedule for each of the alternative methods. a. Straight-line. b. Units-of-production. c. Double-declining-balance.
Assume Plain Ice Cream Company, Incorporated, in Ithaca, NY, bought a new ice cream production kit (pasteurizer/homogenizer, cooler, aging vat, freezer, and filling machine) at the beginning of the year at a cost of $28,000. The estimated useful life was four years, and the residual value was $2,560. Assume that the estimated productive life of the machine was 10,600 hours. Actual annual usage was 4,240 hours in Year 1; 3,180 hours in Year 2; 2,120 hours in Year 3; and 1,060 hours in Year 4. Required: 1. Complete a separate depreciation schedule for each of the alternative methods. a. Straight-line. b. Units-of-production. c. Double-declining-balance. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Complete a depreciation schedule using the straight-line method. Year Depreciation Expense At acquisition 1 2 3 Accumulated Depreciation Net Book Value
Spacely Sprockets, Inc. invested $4,995,000 for new manufacturing equipment for its plant in Jetson, NY. The equipment was anticipated to have a useful life of 11 years, or 29,800 machine hours and a residual value of $507,000. In its first year in operation the equipment was used for 2,180 hours and an additional 2,700 hours in its second year of usage.The Income Statement for years 1 and 2 of Spacely Sprockets, Inc. are shown below.All items rounded to nearest whole dollar. Spacely Sprockets, Inc. Year 1 Year 2 Net Sales $35,590,000 $36,164,000 COGS $23,120,000 $22,978,000 Gross Profit $12,470,000 $13,186,000 Operating Expenses(before adding in Depreciation) $7,650,000 $8,152,000 Income from Operations $4,820,000 $5,034,000 Income Tax Expense (at 30%) $1,446,000 $1,510,200 Net Income $3,374,000 $3,523,800 Round all items to the nearest whole dollar and use rounded values for all future calculations.1. Calculate the depreciation expense for year 1 and 2 using…
Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $491,000 cost with an expected four-year life and a $20,000 salvage value Additional annual information for this new product line follows PV of $. EX of St. PVA of Stand EVA of $ (Use appropriate factors) from the tables provided) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year 3. Compute net present value for this machine using a discount rate of 7% Complete this question by entering your answers in the tabs below. Required 1 Required 2 year 4 Required 3 Compute net present value for this machine using a discount rate of 7%. (Do not round intermediate calculations. Negative amounts should be entered with a minus sign.…
Exact Photo Service purchased a new color printer at the beginning of Year 1 for $37,300. The printer is expected to have a four-year useful life and a $3,900 salvage value. The expected print production is estimated at $1,774,500 pages. Actual print production for the four years was as follows: Year 1 552,700 Year 2 482,600 Year 3 378,000 Year 4 386,200 Total 1,799,500 The printer was sold at the end of Year 4 for $4,150. Required: a. Compute the depreciation expense for each of the four years, using double-declining-balance depreciation
Gruman Company purchased a machine for $198,000 on January 2, Year 1. It made the following estimates: Service life 5 years or 10,000 hours Production 180,000 units Residual value $ 18,000 In Year 1, Gruman uses the machine for 2,000 hours and produces 45,000 units. In Year 2, Gruman uses the machine for 1,200 hours and produces 30,000 units. If required, round your final answers to the nearest dollar. If Gruman used a service life of 8 years or 15,000 hours and a residual value of $9,000, what would be the effect on the following under the straight-line, sum-of-the-years'-digits, and double-declining-balance depreciation methods? Depreciation expense Straight-line method Year 1 $fill in the blank 21 Year 2 $fill in the blank 22 Sum-of-the-years'-digits method Year 1 $fill in the blank 23 Year 2 $fill in the blank 24 Double-declining-balance method Year 1 $fill in the blank 25 Year 2 $fill in the blank 26
Metallic Peripherals, Inc., has received a production contract for a new product. The contract lasts for 5 years. To do the necessary machiningoperations, the firm can use one of its own lathes, which was purchased 3years ago at a cost of $16,000. Today the lathe can be sold for $8,000. In 5years the lathe will have a zero salvage value. Annual operating andmaintenance costs for the lathe are $4,000/year. If the firm uses its own lathe, it must also purchase an additional lathe at a cost of $12,000; its value in 5 years will be $3,000. The new lathe will have annual operating and maintenance costs of $3,500/year. As an alternative, the presently owned lathe can be traded in for $10,000 and a new lathe of larger capacity purchased for a cost of $24,000; its value in 5 years is estimated to be $8,000, and its annual operating and maintenance costs will be $6,000/ year. Solve, a. Use the EUAC cash flow approach. b. Use the EUAC opportunity cost approach.An additional alternative is to…
Assume Plain Ice Cream Company, Incorporated, in Ithaca, NY, bought a new ice cream production kit (pasteurizer/homogenizer, cooler, aging vat, freezer, and filling machine) at the beginning of the year at a cost of $22,000. The estimated useful life was four years, and the residual value was $2,000. Assume that the estimated productive life of the machine was 10,000 hours. Actual annual usage was 4,000 hours in Year 1; 3,000 hours in Year 2; 2,000 hours in Year 3; and 1,000 hours in Year 4. Required: 1. Complete a separate depreciation schedule for each of the alternative methods. a. Straight-line. b. Units-of-production. c. Double-declining-balance. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Year At acquisition 1 2 3 4 Req 1C Complete a depreciation schedule using the straight-line method. Depreciation Accumulated Expense Net Depreciation Book Value
Gruman Company purchased a machine for $198,000 on January 2, Year 1. It made the following estimates: Service life 5 years or 10,000 hours Production 180,000 units Residual value $ 18,000 In Year 1, Gruman uses the machine for 2,000 hours and produces 45,000 units. In Year 2, Gruman uses the machine for 1,200 hours and produces 30,000 units. If required, round your final answers to the nearest dollar. For each method, what is the book value of the machine at the end of Year 1? At the end of Year 2? Straight-line method Year 1 Year 2 Sum-of-the-years'-digits method Year 1 Year 2 Double-declining-balance method Year 1 $fill in the blank 15 Year 2 $fill in the blank 16 Activity method based on hours worked Year 1 $fill in the blank 17 Year 2 $fill in the blank 18 Activity method based on units of output Year 1 $fill in the blank 19 Year 2 $fill in the blank 20

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