Question

Multiple Choice Question 205 A company purchased factory equipment for 1400000. It is estimated that the equipment will have a $40000 salvage value at the end of its estimated 8-year seul tre. If the company uses the double-declining balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be $100000 367500 $75000 190000

equipment was purchased for $86,300 on January 1, 2016. Freight charges amounted yo $3,800 and there was a cost of $12,000 for building a foundation and installing the equipment. It is estimated that the equipment will have $22,000 salvage value at the end of its 5 year useful life. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?

Answer 1

Question 1

Correct answer--------$75000

Working

Double declining Method
A	Cost	$ 400,000
B	Residual Value	$ 40,000
C=A - B	Depreciable base	$ 360,000
D	Life [in years]	8
E=C/D	Annual SLM depreciation	$ 45,000
F=E/C	SLM Rate	12.50%
G=F x 2	DDB Rate	25.00%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$ 400,000	25.00%	$ 100,000	$ 100,000	$ 300,000
2	$ 300,000	25.00%	$ 75,000	$ 175,000	$ 225,000

.

Question 2

Correct answer--------$54270

All cost associated with the equipment to make equipment ready for use will be added to the cost of equipment. The transportation cost including incidental expense such as insurance are included in cost of equipment.

Question 3

Correct answer--------$32040

Working

Straight line Method
A	Cost	$ 102,100
B	Residual Value	$ 22,000
C=A - B	Depreciable base	$ 80,100
D	Life [in years left ]	5
E=C/D	Annual SLM depreciation	$             16,020.00

.

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
2016	$        102,100.00	$             16,020.00	$             16,020.00	$              86,080.00
2017	$          86,080.00	$             16,020.00	$             32,040.00	$              70,060.00