Question

Tamarack Company purchased a plant from one of its suppliers. The $1.000.000 purchase price included the land, a building and factory machinery am negotiate the purchase of the plant. An appraisal showed the too l s for the purchased b 55.000 Property Assessed Value Bud Machinery machinery accounts in Tamara company records Using the assessed value as a guide allocate the total purchase price of the plant to the land buildinn Do not round until your finalan wwersRondanswers to the nearest door Allocation of Asset Purchase Fine Total Previous Save Answers

Answer 1

Tamarack Corporation

Allocation of purchase costs of plant on the basis of assessed values

Purchase price Add: Legal fees Total purchase Cost $ $ $ 1,000,000.00 6,000.00 1,006,000.00 Asset Land Building Machinery 456000 Total 318000 Assessed Value 126000 900000 Allocation of Total Costs on the basis of Assessed value of each asset 1006000 x (126000/9000 1006000 x (456000/9001006000 x (318000/900000) 140840 509706.6667 355453.3333 Rounded to nearest dollar Rounded to nearest is 140,840 140 509,707$ 355,453 $ 1,006,000.00

Sklyer Inc. Calculation of depreciation on Laser Cutting Machines under different methods

1) Straight line method - Under this method the total depreciable value is divided by the useful life of the asset and the value is the amount of annual depreciation to be charged for each year of it's useful life. The annual depreciation value will be the same amount throughout the useful life of the asset.

Cost of Machinery Less: Residual Value Depreciable value S $ 120,000.00 (5,000.00) 115,000.00 4 Years Useful life No. of Cuttings 920000

Formula = Depreciable value /Useful life of the asset

115000/4 = $28,750.00

Therefore, under straight line method, every year $28,750 is charged as depreciation on the laser cutting machine.

2) Double Declining Method -

It is an accelerated method of depreciation wherein the asset is depreciated at a higher value in initial years of its use assuming that the asset is used more during the initial years and the depreciation value declines with the life of asset. The depreciation rate used is the twice of the straight line depreciation rate and the depreciation is charged on the opening balance of the asset for each year.

Calculation of Depreciation % under straight line method

Formula = (Annual Depreciation Under Straight line/Depreciable Value of asset) x 100

(28750/115000)*100

=25%

Deprecation % under Double Declining Method = Straight line method Depreciation x 2

25% x 2 = 50%

Calculation of depreciation under Double Declining Year Closing Book Value - Depreciation @ 50% of Opening Book Value Opening Book Value Opening Book Value Depreciation) 1 $ 120,000.00 $ 60,000.00 $ 60,000.00 21 S 60,000.00 $ 30,000.00 $ 30,000.00 3 $ 30,000.00 $ 15,000.00 $ 15,000.00 4 $ 15,000.00 $ 7,500.00 $ 7,500.00

3) Depreciation under Units of Production

Under this method the total depreciable value of the asset is divided by the total number of units produced during the life of the asset to arrive at the depreciation cost per unit.

For calculating the annual depreciation, the total units produced during the year is multiplied by the depreciation cost per unit.

Calculation of depreciation cost per unit.

Depreciable value of laser cutting machine = $115000

Total number of cuttings during lifetime = 920000

Depreciation cost per unit = Depreciable value/No. of Units during lifetime

115000/920000 = 0.1250 per unit

Calculation of Depreciation per year for 4 years

Year Total Depreciation Cost (No. of units x Depreciation cost | Depreciation cost per No. of Units produced per unit unit) 200000 $ 0.1250 $ 25,000.00 350000 $ 0.1250S 43,750.00 260000 $ 0.1250 $ 32,500.00 110000 $ 0.1250 $ 13,750.00 Rounded to nearest dollar 25000 43750 32500 13750