The cost of the wicketer machine is as follows: Purchase Price R70 000 Installation R15 000 Staff Training R6 500 The machine has a useful life of 10 years and management's policy is to revalue the machine every two years from the date of purchase. The entity adopts the elimination method for revaluations. The machine is depreciated on a straight-line basis. An independent valuator who is a competent industry expert has determined the fair value of the machine to be R90 000 on the 2nd anniversary of the purchase of the machine. The Financial Director has also approved a policy that the revaluation surplus may be transferred to retained earnings as the asset is used. Required: Show all current year journal entries in respect of the Wicketer Machine up until the year ended 30 June 2022. Journal Narrations are required. Round all figures to the nearest Rand. Q.1.2

The cost of the wicketer machine is as follows: Purchase Price R70 000 Installation R15 000 Staff Training R6 500 The machine has a useful life of 10 years and management's policy is to revalue the machine every two years from the date of purchase. The entity adopts the elimination method for revaluations. The machine is depreciated on a straight-line basis. An independent valuator who is a competent industry expert has determined the fair value of the machine to be R90 000 on the 2nd anniversary of the purchase of the machine. The Financial Director has also approved a policy that the revaluation surplus may be transferred to retained earnings as the asset is used. Required: Show all current year journal entries in respect of the Wicketer Machine up until the year ended 30 June 2022. Journal Narrations are required. Round all figures to the nearest Rand. Q.1.2

Name: 22The cost of the wicketer machine is as follows:Purchase PriceR70 00
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Description: 22The cost of the wicketer machine is as follows:Purchase PriceR70 000InstallationR15 000Staff TrainingR6 500The machine has a useful life of 10 years and management's policy is to revalue the machineevery two years from the date of purchase. The en

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 4BE: Replace equipment A machine with a book value of 80,000 has an estimated five-year life. A proposal...

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REPLACEMENT ANALYSIS The Dauten Toy Corporation currently uses an injection molding machine that was purchased 2 years ago. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is 2,100, and it can be sold for 2/500 at this time. Thus, the annual depreciation expense is 2,100/6 = 350 per year. If the old machine not replaced, it can be sold for 500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. This machine falls into the MACRS 5-year class so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by 1,500 per year. The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dauten's marginal federal-plus-state tax rate is 40%, and its WACC is 11%. Should it replace the old machine?
REPLACEMENT ANALYSIS The Dauten Toy Corporation currently uses an injection molding machine that was purchased 2 years ago. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is 2,100, and it can be sold for 2,500 at this time. Thus, the annual depreciation expense is 2,100/6 = 350 per year. If the old machine is not replaced, it can be sold for 500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. This machine falls into the MACRS 5-year class so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year. The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 40%, and its WACC is 15%. Should it replace the old machine?
Differential analysis for machine replacement Boyer Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is 60,000, the accumulated depreciation is 24,000, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of 180,000. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: a. Prepare a differential analysis dated May 4 to determine whether to continue with ( Alternative 1) or replace (Alternative 2) the old machine. Prepare the analysis over the useful life of the new machine. b. Based only on the data presented, should the proposal be accepted? c. What are some of the other factors that should be considered before a final decision is made?
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.