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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

You are the accountant for Raleigh Industries, a manufacturer of plastic gears for electric motors. The company’s production facility in Pittsburgh has a cost of $3,800,000. an estimated residual value of $400,000. and an estimated useful life of 40 years. You are using the straight-line method of depreciation for this asset.

a. What is the amount of the annual depreciation?

b. What is the book value of the property at the end of the twentieth year of use?

c. If at the start of the twenty-first year you revise your estimate so that the remaining useful life is 15 years and the residual value is $120,000. what should be the depreciation expense for each of the remaining 15 years?

(a)

To determine

To calculate: The annual depreciation of the asset of Raleigh Industries when the production facility purchased cost is $3,800,000.

Explanation

Given Information:

The cost of the production facility is $3,800,000. The residual value of production facility is $400,000 and expected to last 40 years.

Formula used:

The steps to calculate annual depreciation 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 as:

Total amount of depreciation=Total costSalvage cost

Step 3: Calculate the annual depreciation by dividing estimated useful life from the total amount of depreciation as:

Total amount of annual depreciation=Total depreciationestimated useful life

Calculation:

Consider the provided cost of production facility is $3,800,000. The residual value of production facility is $400,000 which is expected to last 40 years

(b)

To determine

To calculate: The book value of asset after twentieth year of use when the production facility purchased cost is $3,800,000.

(c)

To determine

To calculate: The annual depreciation of the asset of Raleigh Industries when the estimate is revised at the start of twenty-one year and the residual value is $120,000.

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