week 7 - EXERCISE 11-1 (1520 minutes) (a) Straight-line...

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EXERCISE 11-1 (15–20 minutes) (a) Straight-line method depreciation for each of Years 1 through 3 = $518,000 – $50,000 = $39,000 12 (b) Sum-of-the-Years’-Digits = 12 X 13 = 78 2 12/78 X ($518,000 – $50,000) = $72,000 depreciation Year 1 11/78 X ($518,000 – $50,000) = $66,000 depreciation Year 2 10/78 X ($518,000 – $50,000) = $60,000 depreciation Year 3 (c) Double-Declining-Balance method depreciation rate. 100 % X 2 = 16.67% 12
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$518,000 X 16.67% = $86,351 depreciation Year 1 ($518,000 – $86,351) X 16.67% = $71,956 depreciation Year 2 ($518,000 – $86,351 – $71,956) X 16.67% = $59,961 depreciation Year 3 EXERCISE 11-4 (15–25 minutes) (a) $279,000 – $15,000 = $264,000; $264,000 ÷ 10 yrs. = $26,400 (b) $264,000 ÷ 240,000 units = $1.10; 25,500 units X $1.10 = $28,050 (c) $264,000 ÷ 25,000 hours = $10.56 per hr.; 2,650 hrs. X $10.56 = $27,984 (d) 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55 OR n(n + 1) = 10( 1 1 ) = 5 5
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2 2 10 X $264,000 X 1/3 = $16,0 00 55 9 X $264,000 X 2/3 = 28,8 00 55 Total for 2011 $44,8 00 (e) $279,000 X 20% X 1/3 = $18, 6 0 0 [$279,000 – ($279,000 X 20%)] X 20% X 2/3 = 29, 7 6 0
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Total for 2011 $48, 3 6 0 [May also be computed as 20% of ($279,000 – 2/3 of 20% of $279,000)]
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EXERCISE 11-6 (20–30 minutes) (a) 2010 Straight- line $304,000 – $16,000 = $36,000/year 8 3 months—Depreciation ($36,000 X 3/12) = $9,000 (b) 2010 Output $304,000 – $16,000 = $7.20/output unit 40,000 1,000 units X $7.20 = $7,200 (c) 2010 Working hours $304,000 – $16,000 = $14.40/hour 20,000 525 hours X $14.40 = $7,560
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(d) 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 36 OR n(n + 1) = 8(9) = 36 2 2 Allocated to Sum-of-the-years’- digits Total 2010 2011 2012 Yea r 1 8/36 X $288,000 = $64,00 0 $16,000 $48,000 2 7/36 X $288,000 = $56,00 0 14,000 $42,000 3 6/36 X $288,000 = $48,00 0 12,000 $16,000 $62,000 $54,000 2012: $54,000 = (9/12 of 2 nd year of machine’s life plus 3/12 of 3 rd year of machine’s life) (e)Double-declining-balance 2011: 1/8 X 2 = 25%. 2010: 25% X $304,000 X 3/12 = $19,000 2011: 25% X ($304,000 – $19,000) = $71,250
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OR 1 st full year (25% X $304,000) = $76,000 2 nd full year [25% X ($304,000 – $76,000)] = $57,000 2010 Depreciation 3/12 X $76,000 = $19,000 2011 Depreciation 9/12 X $76,000 = $57,000 3/12 X $57,000 = 14,250 $71,250 EXERCISE 11-8 (20–25 minutes) Old Machine June 1, 2008 Purchase. ................................. $31,800 Freight. ..................................... 200 Installation. .............................. 500 Total cost. ........................... $32,500
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Annual depreciation charge: ($32,500 – $2,500) ÷ 10 = $3,000 On June 1, 2009, debit the old machine for $2,700; the revised total cost is $35,200 ($32,500 + $2,700); thus the revised annual depreciation charge is: ($35,200 – $2,500 – $3,000) ÷ 9 = $3,300. Book value, old machine, June 1, 2012:
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This note was uploaded on 11/03/2010 for the course AC550 505 taught by Professor Weiss during the Summer '09 term at Keller Graduate School of Management.

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week 7 - EXERCISE 11-1 (1520 minutes) (a) Straight-line...

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