Units of production method with workings required. A company purchased machinery for $ 200,000 on 1st January . It has an estimated useful life of 10 years and an estimatedsalvage value of $ 20,000 . The firm sells the asset at the salvage value at the end of the 10th year. The machine has anexpected production of 15000 units during its useful life. Now the production pattern is as follows : Year Production 1-32000 units per year 4-7 1500 units per year 8-10 1000 units per year Answer the following questions using the Units ofProduction Method.Show depreciation expense year wise for all the years

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Description: Units of production method with workings required. A company purchased machinery for $ 200,000 on 1st January . It has an estimated useful life of 10 years and an estimatedsalvage value of $ 20,000 . The firm sells the asset at the salvage value at t

Depreciation is a decrease in the value of assets due to normal wear and tear, the effect of time,…

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Business

Accounting

Units of production method with workings required.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 4EA: Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is...

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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.
Utica Machinery Company purchases an asset for 1,200,000. After the machine has been used for 25,000 hours, the company expects to sell the asset for 150,000. What is the depreciation rate per hour based on activity?
Urquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the assets life, and create the journal entry for year eleven.
A machine costing 350,000 has a salvage value of 15,000 and an estimated life of three years. Prepare depreciation schedules reporting the depreciation expense, accumulated depreciation, and book value of the machine for each year under the double-declining-balance and sum-of-the-years-digits methods. For the double-declining-balance method, round the depreciation rate to two decimal places.
Montezuma Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for eight years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After three years of recording depreciation, Montezuma determines that the delivery truck will only be useful for another three years and that the salvage value will increase to $4,000. Determine the depreciation expense for the final three years of the assets life, and create the journal entry for year four.
Grandorf Company replaced the engine in a truck for 8,000 and expects the new engine will extend the life of the truck two years beyond the original estimated life. Related information is provided below. Cost of truck 65,000 Salvage value 5,000 Original estimated life 6 years The truck was purchased on January 1, 20-1. The engine was replaced on January 1, 20-6. Using straight-line depreciation, compute depreciation expense for 20-6.
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 ten years. Montello uses the straight-line depreciation method. Calculate the annual depreciation expense.
Godwin Co. owns three delivery trucks. Details for each truck at the end of the most recent year follow: At the beginning of the year, a hydraulic lift is added to Truck 1 at a cost of 4,500. The addition of the hydraulic lift will allow the company to deliver much larger objects than could previously be delivered. At the beginning of the year, the engine of Truck 2 is overhauled at a cost of 5,000. The engine overhaul will extend the trucks useful life by three years. Write a short memo to Godwins chief financial officer explaining the financial statement effects of the expenditures associated with Trucks 1 and 2.
Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and is expected to be driven for ten years. Montezuma uses the straight-line depreciation method. Calculate the annual depreciation expense. After five years of recording depreciation, Montezuma determines that the delivery truck will be useful for another five years (ten years in total, as originally expected) and that the salvage value will increase to $10,000. Determine the depreciation expense for the final five years of the assets life, and create the journal entry for years 6â€“10 (the entry will be the same for each of the five years).
A delivery van was bought for 18,000. The estimated life of the van is four years. The trade-in value at the end of four years is estimated to be 2,000. Required Prepare a depreciation schedule for the four-year period using the straight-line method. Check Figure Year 1 depreciation, 4,000
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.