ACTG 1P91 Lecture Notes - Lecture 12: Cash Flow Statement, Retained Earnings

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champagnehornet121

20 Apr 2019

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Sample review problems: property, plant and equipment. On june 1, 2014, niagara corporation purchased a machine to process steel. ,000,000 was purchased from ontario machine inc. located in toronto. ,000, annual insurance on the machine was ,000 while the installation cost was ,000. Managers have estimated a 7 year useful life and a ,000 salvage value (residual value). Required: (a) the president of niagara corporation wants you to calculate amortization expense for the years ended. December 31, 2014 and december 31, 2015 assuming the company chooses i) the straight-line method and: the double-declining balance method of amortization. Please show all your work. (b) assume that niagara corporation has chosen the straight-line method to amortize the asset. January 1, 2016, management changed its initial estimate of the useful life of the asset. Based on further research, their engineering department now believes the total useful life of the asset is more likely to be 8 years.

Related Questions

Universal Tools Company purchased a machine on July 1, 2015 for$180,000. The machine was estimated to have a useful life of 10years and a salvage value of $20,000. The companyâs fiscal yearends on December 31.

Required:

What was Universal Toolsâ depreciation expense for 2015 and 2016under the Double-declining balance method?

Suppose on Jan. 1, 2017, Universal Tools decided that themachineâs remaining useful life (starting from Jan. 1, 2017) wasonly 6 years and the salvage value was only $15,000, and that itwas more appropriate to apply the straight-line depreciation methodfrom then on. Calculate the depreciation expense for 2017.

pinkelk556

In recent years, Wildhorse Co. has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below. Machine Acquired Cost Salvage Value Useful Life (in years) Depreciation Method 1 Jan. 1, 2015 $123,000 $23,000 10 Straight-line 2 July 1, 2016 92,500 11,400 5 Declining-balance 3 Nov. 1, 2016 75,700 6,700 6 Units-of-activity For the declining-balance method, Wildhorse Co. uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 34,500. Actual hours of use in the first 3 years were: 2016, 850; 2017, 6,200; and 2018, 7,900. Collapse question part (a) Compute the amount of accumulated depreciation on each machine at December 31, 2018. MACHINE 1 MACHINE 2 MACHINE 3 Accumulated Depreciation at December 31 $ $ $

champagnegerbil999

The cost of equipment purchased by Charleston, Inc., on June 1,2014, is $139,730. It is estimated that the machine will have a$7,850 salvage value at the end of its service life. Its servicelife is estimated at 7 years, its total working hours are estimatedat 65,940, and its total production is estimated at 824,250 units.During 2014, the machine was operated 9,420 hours and produced86,350 units. During 2015, the machine was operated 8,635 hours andproduced 75,360 units.

Compute depreciation expense on the machine for the year endingDecember 31, 2014, and the year ending December 31, 2015, using thefollowing methods. (Round answers to 0 decimal places,e.g. 45,892.)

1. Straight Line: For 2014* and 2015

2. Sum-of-the-Years'-digits: For 2014 and2015

3. Double declining balance (twice the straight linerate): For 2014 and 2015

*Note: 18840 is not the correct value for 2014 whenusing the straight line method (however, it is the correct valuefor 2015)

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ACTG 1P91 Lecture Notes - Lecture 12: Cash Flow Statement, Retained Earnings

ACTG 1P91 Full Course Notes

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