Chapter 17, Problem 3AT

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Oxford Manufacturing. Inc., purchased new equipment totaling $648,000. Shipping charges were $2,200, and installation amounted to $1,800. The equipment is expected to last 4 years and have a residual value of $33,000. If the company elects to use the straight-line method of depreciation, prepare a depreciation schedule for these assets.

**Oxford Manufacturing, Inc. Straight-Line Depreciation Schedule Manufacturing Equipment**

End of Year |
AnnualDepreciation |
AccumulatedDepreciation |
BookValue |

(new) | |||

1 | |||

2 | |||

3 | |||

4 |

To determine

**To calculate:** The annual depreciation, accumulated depreciation and book value of Oxford Manufacturing’s equipment when the equipment purchased cost is $648,000, shipping charges are $2,200 and installation amounted to $1,800. And also prepare the depreciation schedule of these assets by the use of straight-line method.

Explanation

**Given Information:**

The cost of the new equipment purchased by Oxford Manufacturing is

The shipping and the installation charges are $2,200 and $1,800, respectively.

The residual value of equipment is

Expected life is 4 years.

**Formula used:**

The steps to prepare depreciation schedule by straight line method are as follows:

Step 1: Calculate the total cost.

Step 2: Calculate the total amount of depreciation by subtracting salvage value from the total cost.

Step 3: Divide the total amount of depreciation by the estimated useful life and calculate the annual depreciation

Step 4: Prepare the depreciation schedule in form of chart.

Book value,

**Calculation:**

Consider the provided data,

Cost of the new equipment is $648,000

The shipping and the installation charges are $2,200 and $1,800, respectively.

The total cost of the equipment is:

Now, by the use of the above formula, the total cost of the equipment is,

Now, the residual value of equipment is

The total amount of depreciation is,

Now, by the use of the above formula, the total amount of depreciation is,

The total amount of annual depreciation is,

Now, by the use of above formula, the total amount of annual depreciation is,

Book value in the first year will be,

Now, as the method used is straight line depreciation therefore the annual depreciation is same every year

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