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Iridium Co. purchased a machine on the first day of a year. The following data is available for the machine: The following in

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Answer #1

1. Option (a) is correct

Under double declining balance method, depreciation is calculated by the following formula:

Depreciation = 2 * 1 / N * (Cost - Accumulated depreciation)

where, n is the no. of years or useful life and accumulated depreciation is depreciation charged till date

For first year, accumulated depreciation will be zero.

So, depreciation for first year will be:

Depreciation for first year = 2 * 1 / 10 * ($60000 - 0)

Depreciation = 2 * 1 / 10 * $60000 = $12000

Now, in second year, accumulated depreciation will be $12000 (i.e. depreciation charged till date is depreciation for first year)

Depreciation for second year will be:

Depreciation = 2 * 1 / 10 * ($60000 - $12000) = 2 * 1 / 10 * $48000 = $9600

2. Option (b) is correct

Depletion expense is an expense account that is increased for a portion of the cost of a natural resource asset removed from its source.

3. Option (c) is correct

Legal fees incurred in purchasing a natural resource are added to the natural resource's cost.

4. Option (d) is correct

Accumulated depreciation depletion is disclosed in the balance sheet as a deduction from the concerned asset account.

5. Option (c) is correct

Routine maintenance and repair costs are recorded as revenue expenditure.

6. Option (b) is correct

Equipment purchased will be recorded at its purchase price and all the costs incurred till its is ready to use.

Equipment price = $25000 + $1800 + $1100 + $600 = $28500

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