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Adams Inc. purchased a new punch press on January 1, 2017. The company paid $900,000 for the equipment, and also paid ABC Tra
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Answer #1
Answer 1
Price of equipment $          900,000
Transport cost $             37,000
Installation costs $             15,000
Testing costs $               3,500
Amount capitalize to equipment on January 1, 2017 $          955,500
Answer 2
Amount capitalize to equipment on January 1, 2017 $          955,500
Less: residual value $             40,000
Depreciable cost $          915,500
Divided by: useful life in years                            8
Depreciation expense per year $    114,437.50
Accumulated depreciation at the end of 2016 $                 0.00
Add: Depreciation expense for 2017 $    114,437.50
Accumulated depreciation at the end of 2017 $    114,437.50
Add: Depreciation expense for 2018 $    114,437.50
Accumulated depreciation at the end of 2018 $    228,875.00
Add: Depreciation expense for 2019 $    114,437.50
Accumulated depreciation at the end of 2019 $    343,312.50
Year Depreciation expense Accumulated depreciation
2017 $ 114,437.50 $    114,437.50
2018 $ 114,437.50 $    228,875.00
2019 $ 114,437.50 $    343,312.50
Answer 3
Amount capitalize to equipment on January 1, 2017 $    955,500.00
Less: Accumulated depreciation at the end of 2019 $    343,312.50
Net book value of machine at the end of the third year $    612,187.50
Answer 4
Accelerated depreciation method is depreciation method that distribute the higher depreciation during the initially periods.
Depreciation rate as per straight line method (1/8) 12.50%
Depreciation rate as per double decline balance method (2*12.5%) 25.00%
Depreciation expense for 2017 under straight line method $    114,437.50
Depreciation expense for 2017 under double decline balance method (955500*25%) $    238,875.00
Correct option is B Higher than straight line
Answer 5
Amount capitalize to equipment on January 1, 2017 $          955,500
Less: residual value $             40,000
Depreciable cost $          915,500
Divided by: useful life in hours                 30,000
Depreciation rate per hour $   30.5166667
Multiply: Actual hours used in 2017                   3,950
Depreciation expense when 3950 hours $    120,540.83
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