Explanation Depreciation: When the value of asset falls with the passage of time due to reasons like wear and tear and for any other reason, it is called depreciation. Straight Line Method : When the fixed percent of depreciation is charged on the original cost of the asset it is known as the straight line method. Partial Period Assumption: When the asset is purchased on any date after the first of the month, the date of acquisition is considered to be middle of the month. This assumption is known as partial period assumption. Formula to calculate depreciation expense is as follows: Depreciation expense = Cost − Scrap value Useful life Substitute $384,000 for the cost, scrap value is nil and 16 for useful life in formula, Depreciation expense = $ 384 , 000 − 0

Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition

1st Edition

ISBN: 9780134047430

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 11, Problem 11.13BE

To determine

The depreciation for first two years.

Given information:

Cost of oven is $384,000.

Useful life is 16 years.

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Chapter 11, Problem 11.12BE

Chapter 11, Problem 11.14BE

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Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $150,000. The machine’s estimated useful life at the time of the purchase was five years, and its residual value was $10,000. The company reports on a calendar year basis. Required:a-1. Prepare a complete depreciation schedule, beginning with the current year, using the straight-line method. (Assume that the half-year convention is used).a-2. Prepare a complete depreciation schedule, beginning with the current year, using the 200 percent declining-balance method. (Assume that the half-year convention is used).a-3. Prepare a complete depreciation schedule, beginning with the current year, using the 150 percent declining-balance, switching to straight-line when that maximizes the expense. (Assume that the half-year convention is used). b. Which of the three methods computed in part a is most common for financial reporting purposes? c. Assume that Swanson & Hiller sells the machine on…

Chapter 11 Solutions

Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition

Ch. 11 - Stephen J. Cosgrove is the Former Vice President....Ch. 11 - Prob. 11.2Q Ch. 11 - Prob. 11.3Q Ch. 11 - Prob. 11.4Q Ch. 11 - Will the expense/capitalization choice impact...Ch. 11 - Prob. 11.6Q Ch. 11 - Prob. 11.7Q Ch. 11 - For a long-lived operating asset acquired by...Ch. 11 - Prob. 11.9Q Ch. 11 - Prob. 11.10Q

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The depreciation for first two years. Given information: Cost of oven is $384,000. Useful life is 16 years.

Solution Summary: The author calculates the amount of depreciation for first year and second year, based on the straight line method and partial period assumption.