Question

4. On June 30, 2018, Kayla Equipment Company purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value. The cost of the machine was $450,000 and is to be depreciated using the units-of-production method. During the six months of 2018, 24,000 units of product were produced. At the beginning of 2019, engineers estimated that the machine can realistically be used to produce only another 230,000 units. During 2019, 70,000 units were produced. Kayla would report depreciation in 2018 of: a. $18,000 b. $21,950 c. $36,000 d. $43,900 5. Peach Enterprises acquired a franchise from Clanton Incorporated for $300,000. The franchise agreement is for a period of six years. Peach uses straight-line to amortize all intangible assets. What would be the reported book value of the franchise two years after the purchase?

Answer 1

4 computation of depreciation for the year 2018 using confits of production method Depreciation per uniti & cost of abset - salvage value estimated number of units 5 $450,000 - 0 3,00,000 units T = $105 perunit Number of cosits prodieced during 2018 = 24000 units Depreciation = Nomber of consits prodieced x depreciation per unit = 24000 units X $ 1.5 = $36000 Depreciation i. Optionc

Pranchise 3) Computation of book value of franch. after two years original cost - $ 300,000 Useful life - 6 years Amortisation per = original cost Useful life 3.00,ooo 6 Years E $50,000 Book vakee after two - & & 3,00,000 - = $2,00,000 years $50,000*2 years) . Book value = $2,00.000