Question

The following information is available for Rose Bush Jardinière, which has an accounting year-end of December 31, 2018. 1. A building was purchased on January 1, 2004, for $3,200,000. It is estimated to have a $200,000 salvage value at the end of its 30-year useful life. The straight-line method of depreciation is being used. 2. Factory equipment was purchased on January 1, 2017 for $82,000. It was estimated to have an $7,000 salvage value at the end of its 5- year useful life, and an estimated total use of 250,000 units. During 2018, 18,500 units were produced. The units-of-activity method of depreciation is being used. 3. A delivery van was purchased on October 1, 2018, for $76,000. It was estimated to have an $8,000 salvage value at the end of its 5- year useful life. The double-declining balance method of depreciation is being used. 4. Land was purchased on May 1, 2018 for $92,000. Because the land is located near a nuclear power plant, its estimated use life is only 10 years. Rose Bush Jardinière would use the straight-line method of depreciation, if applicable. Accumulated depreciation as of January 1, 2018 is as follows: • Building: $1,400,000 Factory equipment: $5,760 • Delivery van: $0 (because it was only purchased on October 1, 2018) • Land: $0 (because it was only purchased on May 1, 2018) QUESTIONS: 1. For each asset, what is its depreciation expense for the year ending December 31, 2018? (Make sure to list each asset separately.) (1.5 points per asset) 2. What is the net book value of each fixed asset as of December 31. 2018? (Remember, net book value equals cost minus accumulated depreciation.) (Make sure to list each asset separately.) (0.5 points per asset) SPECIFIC INSTRUCTIONS: • Round all answers to the nearest dollar. You must show all of your work for this question. If you do not show your work, you will not receive any points for this question, even if you have the correct answer.

Answer 1

1)

Asset	Formula	Calculation	Depreciation expense for 2018
Building	[Cost-salvage value/useful life	[3200000-200000]/30 $ 100000	100000
Factory equipment	[cost-salvage value]/useful life in units	[82000-7000]/250000 = $ .30 per unit	.30*18500 = $ 5550
Delivery van	Cost(or carrying value)*depreciation rate Depreciation rate = 2/useful life 2/5 = .40 or 40%	[76000*.40]=30400 per year or 30400*3/12 =7600 [for period Oct-Dec]	7600
Land	A land is not a Depreciable asset since it has infinite useful life.		0

2)

Asset	cost	less (-)	Accumulated depreciation	=	Net book value
Building	3200000	-	1400000+100000=1500000	=	1700000
Factory equipment	82000	-	5760+5550=11310	=	70690
Delivery van	76000	-	7600	=	68400
Land	92000	-	0	=	92000