Home Health Care, Inc. purchased a sonogram machine for$400,000. Its functional life is 6 years and its salvage value willbe 10% of its purchase price. Rounding to the nearest dollar, makea table and fill in the values for t = 0, 1, 2, 3, 4, 5, 6 showing(a) year t, (b) the straight-line (SL) depreciation amount for yeart, (c) the book value in year t using SL depreciation, (d) thedouble declining balance amount in year t, (e) the book value inyear t using DDB depreciation. What is the book value in year 5using double declining balance? $58,998 $52,683 $67,008 $64,483$72,226 $48,906
Home Health Care, Inc. purchased a sonogram machine for$400,000. Its functional life is 6 years and its salvage value willbe 10% of its purchase price. Rounding to the nearest dollar, makea table and fill in the values for t = 0, 1, 2, 3, 4, 5, 6 showing(a) year t, (b) the straight-line (SL) depreciation amount for yeart, (c) the book value in year t using SL depreciation, (d) thedouble declining balance amount in year t, (e) the book value inyear t using DDB depreciation. What is the book value in year 5using double declining balance? $58,998 $52,683 $67,008 $64,483$72,226 $48,906
Related questions
Cheetah Copy purchased a new copy machine. The new machine cost$132,000 including installation. The company estimates theequipment will have a residual value of $33,000. Cheetah Copy alsoestimates it will use the machine for four years or about 8,000total hours. Actual use per year was as follows: |
| Year | Hours Used | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | 2,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | 2,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | 2,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | 3,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Bluejay Companypurchased a new machine on October 1, 2017, at a cost of $104,000.The company estimated that the machine has a salvage value of$8,000. The machine is expected to be used for 80,000 working hoursduring its 8-year life. | |||||||||
| Compute depreciation using thefollowing methods in the year indicated. | |||||||||
| 1 | Straight-line method: | 2017 | 2018 | ||||||
| Straight-line for 2017 and 2018, assuming aDecember 31 year-end. | |||||||||
| 2 | Double-declining-balance method: | ||||||||
| Declining-balance using double the straight-linerate for 2017 and 2018. | |||||||||
| 3 | Double-declining-balance method: | ||||||||
| Units-of-activity for 2017, assuming machine usagewas 2,900 hours. | |||||||||
| (Round depreciation per unit to the nearestcent.) | |||||||||
On January 22â, 2016â,TrustyDelivery Service purchased a truckat a cost of $67,000.Before placing the truck inâservice,Trustyspent $2,200
paintingâ it,$1,800 replacing âtires, and $3,700 overhauling theengine. The truck should remain in service for five years and havea residual value of $5,100.Theâ truck's annual mileage is expectedto be 20,000 miles in each of the first four years and 12,800 milesin the fifth yearlong 92,800 miles in total. In deciding whichdepreciation method toâ use,Jacob Nealyâ,the generalâ manager,requests a depreciation schedule for each of the depreciationmethodsâ (straight-line, units-of-production, andâdouble-declining-balance).
Requirement 1. Prepare a depreciation schedulefor each depreciationâ method, showing assetâ cost, depreciationâexpense, accumulatedâ depreciation, and asset book value.
Begin by preparing a depreciation schedule using theâstraight-line method.
Straight-Line Depreciation Schedule | ||||||||
Depreciation for the Year | ||||||||
Asset | Depreciable | Depreciation | Depreciation | Accumulated | Book | |||
Date | Cost | Cost | Rate | Expense | Depreciation | Value | ||
1-2-2016 | ||||||||
12-31-2016 | / | = | ||||||
12-31-2017 | / | = | ||||||
12-31-2018 | / | = | ||||||
12-31-2019 | / | = | ||||||
12-31-2020 | / | = | ||||||
Before completing theâ units-of-production depreciationâschedule, calculate the depreciation expense per unit. â(Rounddepreciation expense per unit to two decimalâplaces.)
( | - | ) / | = | Depreciation per unit | |||
( | - | ) / | = |
Prepare a depreciation schedule using theâ units-of-productionmethod. â(Enter the depreciation per unit to two decimalâ places,$X.XX.)
Units-of-Production Depreciation Schedule | ||||||||
Depreciation for the Year | ||||||||
Asset | Depreciation | Number of | Depreciation | Accumulated | Book | |||
Date | Cost | Per Unit | Units | Expense | Depreciation | Value | ||
1-2-2016 | ||||||||
12-31-2016 | x | = | ||||||
12-31-2017 | x | = | ||||||
12-31-2018 | x | = | ||||||
12-31-2019 | x | = | ||||||
12-31-2020 | x | = | ||||||
Prepare a depreciation schedule using theâdouble-declining-balance (DDB) method. â(Round depreciation expenseto the nearest wholeâ dollar.)
Double-Declining-Balance DepreciationSchedule | ||||||||
Depreciation for the Year | ||||||||
Asset | Book | DDB | Depreciation | Accumulated | Book | |||
Date | Cost | Value | Rate | Expense | Depreciation | Value | ||
1-2-2016 | ||||||||
12-31-2016 | x | = | ||||||
12-31-2017 | x | = | ||||||
12-31-2018 | x | = | ||||||
12-31-2019 | x | = | ||||||
12-31-2020 | ||||||||
Requirement 2.ââ
Trusty prepares financial statements using the depreciationmethod that reports the highest net income in the early years ofasset use. Consider the first year that Trusty uses the truck.Identify the depreciation method that meets theâ company'sobjectives.The depreciation method that reports the highest netincome in the first year is the _____________________ method. Itproduces theâ¼
highest
lowest
depreciation expense and therefore the highest net income.
