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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