Bundle: Financial & Managerial Accounting, Loose-leaf Version, 14th + Working Papers For Warren/reeve/duchac's Corporate Financial Accounting, 14th + ... Financial & Managerial Accounting,
14th Edition
ISBN: 9781337802000
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 9, Problem 9.3TIF
Communication
Godwin Co. owns three delivery trucks. Details for each truck at the end of the most recent year follow:
| Age | Expected Useful Life | Initial Cost | Accumulated |
|
| Truck 1 | 3 | 6 | $22,500 | $11,250 |
| Truck 2 | 5 | 6 | 26,250 | 21,875 |
| Truck 3 | 2 | 6 | 28,500 | 9,500 |
- 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 truck’s useful life by three years.
Write a short memo to Godwin’s chief financial officer explaining the financial statement effects of the expenditures associated with Trucks 1 and 2.
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Students have asked these similar questions
Godwin Co. owns three delivery trucks. Details for each truck at the end of the most
recent year follow:
Expected
Useful Life
Accumulated
Initial Cost
Depreciation
Age
Truck 1
$22,500
$11,250
3
Truck 2
26,250
21,875
Truck 3
2
28,500
9,500
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 truck's useful life by three years.
Write a short memo to Godwin's chief financial officer explaining the financial
statement effects of the expenditures associated with Trucks 1 and 2.
Barefoot Industrial acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $27,000 and has an
estimated useful life of four years and an estimated salvage value of $4,000.
Required:
a-1. Calculate depreciation expense for each year of the truck's life using Straight-line depreciation.
Depreciation expense $ 13,500 per year
a-2. Calculate depreciation expense for each year of the truck's life using Double-declining-balance depreciation.
Year Depreciation Expense
1
$
27,000
6,750
6,750
3,375
2
3
4
$
$
b. Calculate the truck's net book value at the end of its third year of use under each depreciation method.
Depreciation method
Straight-line depreciation
Double-declining-balance
depreciation
Net book value
S
5,750
S
6,750
c. Assume that Barefoot Industrial had no more use for the truck after the end of the third year and that at the beginning of the fourth
year It had an offer from a buyer who was willing to pay $6,300 for the truck. Should the…
build a modelA purchased machine cost $320,000, with delivery and installation charges amounting to $30,000. The declared salvage value was $50,000. Its useful life is 10 years. a) Compute the SL depreciation schedule over its useful life. b) Compute the DDB depreciation schedule over its useful life. c) Compute the MACRS depreciation schedule. Its ADR life is 12 years. d) Early in Year 4, the company changed its product mix and found that it no longer needed the machine. One of its competitors agreed to buy the machine for $110,000. Determine the loss, gain, or recapture on the sale. Use the MACRS schedule
Chapter 9 Solutions
Bundle: Financial & Managerial Accounting, Loose-leaf Version, 14th + Working Papers For Warren/reeve/duchac's Corporate Financial Accounting, 14th + ... Financial & Managerial Accounting,
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