1. Rufiel Corporation purchased a new machine on January 1, 2023. The machine cost $300,000 and had an estimated salvage value of $40,000. Inverness estimated that the machine will have a useful life of 8 years or 100,000 units. Inverness uses the machine in its manufacturing operations and produces 20,000 units in Year 2023, 33,000 units in Year 2024 and 19,000 units in Year 2025, 17,000 units in Year 2026 and 6,000 units in Year 2027 and 5,000 units in Year 2027. Required: a) Compute depreciation expense for Years 2023 and 2024 using the following methods: • straight line • units-of-production • double declining balance ■ DEPRECIATION EXPENSE 2023 DOUBLE STRAIGHT- YEAR LINE METHOD UNITS OF PRODUCTION DECLINING BALANCE METHOD METHOD 2024 b) Indicate what is the balance of Accumulated Depreciation at the end of each year using the Units-of-Production Method YEARS ACCUMULATED DEPRECIATION 2023 2024 c) What is the book value at the end of 2024 using the Unit-of- Production Method?

1. Rufiel Corporation purchased a new machine on January 1, 2023. The machine cost $300,000 and had an estimated salvage value of $40,000. Inverness estimated that the machine will have a useful life of 8 years or 100,000 units. Inverness uses the machine in its manufacturing operations and produces 20,000 units in Year 2023, 33,000 units in Year 2024 and 19,000 units in Year 2025, 17,000 units in Year 2026 and 6,000 units in Year 2027 and 5,000 units in Year 2027. Required: a) Compute depreciation expense for Years 2023 and 2024 using the following methods: • straight line • units-of-production • double declining balance ■ DEPRECIATION EXPENSE 2023 DOUBLE STRAIGHT- YEAR LINE METHOD UNITS OF PRODUCTION DECLINING BALANCE METHOD METHOD 2024 b) Indicate what is the balance of Accumulated Depreciation at the end of each year using the Units-of-Production Method YEARS ACCUMULATED DEPRECIATION 2023 2024 c) What is the book value at the end of 2024 using the Unit-of- Production Method?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 8PB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is...

See similar textbooks

Similar questions

Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. Dunedin buys equipment frequently and wants to print a depreciation schedule for each assets life. Review the worksheet called DEPREC that follows these requirements. Since some assets acquired are depreciated by straight-line, others by units of production, and others by double-declining balance, DEPREC shows all three methods. You are to use this worksheet to prepare depreciation schedules for the new machine.
Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.
On January 1, 2023, a machine was purchased for $120,000. The machine has an estimated salvage value of $9,600 and an estimated useful life of 5 years. The machine can operate for 120.000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2023, 24,000 hours: 2024, 30,000 hours: 2025, 18,000 hours: 2026 3000 hours: and 2027, 12,000 hours
The Erley Equipment Company purchased a machine 5 years ago at a cost of $100,000. The machine had an expected life of 10 years at the time of purchase, and an expected salvage value of $10,000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $10,000, or by $9,000 per year. Anew machine can be purchased for $150,000, including installation costs. During its 5- year life, it will reduce cash operating expenses by $50,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life so the applicable depreciation rates are 33 percent, 45 percent, 15 percent, and 7 percent. The old machine can be sold today for $65,000. The firm’s tax rate is 35 percent. The appropriate discount rate is 16 percent. d. What is the NPV of this project? e.…
The Erley Equipment Company purchased a machine 5 years ago at a cost of $100,000. The machine had an expected life of 10 years at the time of purchase, and an expected salvage value of $10,000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $10,000, or by $9,000 per year. Anew machine can be purchased for $150,000, including installation costs. During its 5- year life, it will reduce cash operating expenses by $50,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life so the applicable depreciation rates are 33 percent, 45 percent, 15 percent, and 7 percent. The old machine can be sold today for $65,000. The firm’s tax rate is 35 percent. The appropriate discount rate is 16 percent. a. If the new machine is purchased, what is…
A machine that produces cellphone components is purchased on January 1, 2024, for $171,000. It is expected to have a useful life of four years and a residual value of $12,000. The machine is expected to produce a total of 200,000 components during its life, distributed as follows: 40,000 in 2024, 50,000 in 2025, 60,000 in 2026, and 50,000 in 2027. The company has a December 31 year end. (a) Calculate the amount of depreciation to be charged each year, using each of the following methods: i. Straight-line method Straight-line method depreciation Senter a dollar amount per year per year ii. Units-of-production method (Round depreciation per unit to 3 decimal places, e.g. 15.257 and depreciation expense to 0 decimal places, e.g. 125.) Units-of-production method depreciation Senter a dollar amount per unit rounded to 3 decimal places per unit Year Depreciation Expense 2024 Senter a dollar amount 2025 Senter a dollar amount 2026 Senter a dollar amount 2027 Senter a dollar amount iii.…
A machine that produces cellphone components is purchased on January 1, 2024, for $163,000. It is expected to have a useful life of four years and a residual value of $11,000. The machine is expected to produce a total of 200,000 components during its life, distributed as follows: 40,000 in 2024, 50,000 in 2025, 60,000 in 2026, and 50,000 in 2027. The company has a December 31 year end. (a) Calculate the amount of depreciation to be charged each year, using each of the following methods: i. Straight-line method Straight-line method depreciation $ I per year ii. Units-of-production method (Round depreciation per unit to 3 decimal places, e.g. 15.257 and depreciation expense to O decimal places, e.g. 125.)
On January 1, 2022, Alkek Company purchased the following two machines for use in its production process. Machine A - The cash price of this machine was $38,000. Related expenditures included: sales tax $1,700, shipping costs $150, insurance during shipping $80, installation and testing costs $70, and $100 of oil and lubricants to be used with the machinery during its first year of operations. Alkek estimates that the useful life of the machine is 5 years with a $5,000 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used. Machine B - The recorded cost of this machine was $160,000. Alkek estimates that the useful life of the machine is 4 years with a $10,000 salvage value remaining at the end of that time period. Calculate the amount of depreciation expense that Alkek Company should record for machine A and B (seperately) for each year of its useful life under the following assumptions. (a) Alkek uses the straight-line…