ad a The Black Limo Company (BLC) purchased a limo on January 1 of Year 1 at a cost of $48,000. The limo $8,000 salvage value. BLC expected to drive the limo for 100,000 miles before disposing of it. Actual miles driven per year were as follows: 30,000 in Year 1, 40,000 in Year 2, 20,000 in Year 3, and 25,000 in Year 4. Based on this information, depreciation expense for Year 4 was O $10,000 O $14,000 O $12,000 O $4,000

ad a The Black Limo Company (BLC) purchased a limo on January 1 of Year 1 at a cost of $48,000. The limo $8,000 salvage value. BLC expected to drive the limo for 100,000 miles before disposing of it. Actual miles driven per year were as follows: 30,000 in Year 1, 40,000 in Year 2, 20,000 in Year 3, and 25,000 in Year 4. Based on this information, depreciation expense for Year 4 was O $10,000 O $14,000 O $12,000 O $4,000

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 4EB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is...

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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.
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.
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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…
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $5,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method and the expected miles per year for the five years are: 27,500 miles. 30,250 miles. 26,750 miles. 21,000 miles. 19,500 miles. What is the depreciable cost per mile?   (round to two decimal places and format per text) Calculate the year one depreciation expense. What is the year one book value? Calculate the year three depreciation expense. What is the year three book value?
Two years ago, a FN325 Lathe machine was purchased with an estimated salvage value of RM2,000 at the conclusion of its seven-year life. The annual operating expenditures are RM2,000. Another company's salesperson is selling a replacement NC345 Lathe machine for RM14,000 with a salvage value of RM1,400 after five years. The annual operating costs for the FN345 Lathe machine will be only RM1,400. For the FN325 Lathe machine, a RM10,400 trade-in allowance has been offered. Should you replace the FN325 Lathe machine if the annual interest rate is 12% before taxes?
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Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is expected to be driven for eight years or 120,000 miles. Montello uses the straight-line depreciation method. Calculate the annual depreciation expense. Montello uses the units-of-production depreciation method and in year one it expects to use the truck for 23,000 miles. Calculate the annual depreciation expense.
A highway construction firm purchased a particular earthmoving machine 3 years ago for $125,000. The salvage value at the end of 8 years was estimated to be 35% of first cost. The firm earns an average annual gross revenue of $105,000 with the machine and the average annual operatingcosts have been and are expected to be $65,000. The firm now has the opportunity to sell the machine for $70,000 and subcontract the work normally done by the machine over the next 5 years. If the subcontracting is done, the average annual gross revenue will remain $105,000 but the subcontractor charges $85,000/end-of-year for these services. If a 15% rate of return before taxes is desired, use a cash flow approach to determine by the annual worth method whether or not the firm should subcontract.
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