Solution Quiz #4
Problem I.
1.
E—Book value equals historical cost less accumulated depreciation.
The
historical value of the equipment is 169,000 (126,000+26,000+17,000).
Based on
straightline we should depreciate 16,900 a year (169,000/10 years).
Therefore at
the end of the first year the book value is 152,100.
2.
A—Remember we do not use the salvage value to calculate doubledeclining
balance.
We first calculate the straightline rate (100%/5 years)=20%.
We then
double this amount, (2*20%)=40%.
Next we calculate the depreciation for 2004
(625,000*40%=250,000). Then we calculate the depreciation for 2005 ((625,000
250,000)*40%=150,000).
Therefore, the total accumulated depreciation at the
end of 2005 is 400,000 (250,000+150,000).
3.
D—First we need to calculate the amount of depreciation expense removed from
the accumulated depreciation account by selling PP&E.
This is a plug figure.
Accumulated depreciation removed=Ending Acc. Dep. –Beginning Acc. Dep. –
Depreciation Expense (724,300450,700303,800=30,200).
With this we can
calculate the historical value of the equipment sold since the Book value of
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 Winter '08
 Winkle
 Depreciation, 3 years, $177,000, $664,400, $823,200

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