AC301-03_Marjorie Bowden-Project-Unit 5

AC301-03_Marjorie Bowden-Project-Unit 5 - The Winsey...

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Unformatted text preview: The Winsey Company purchased equipment on January 2, 2010, for $700,000. The equipment has the following characteristics: Estimated service life 20 years Estimated residual value $50,000 100,000 hours 950,000 units of output During 2010 and 2011, the company used the machine for 4,500 and 5,500 hours, respectively, and produced 40,000 and 60,000 units, respectively. Required Compute the depreciation for 2010 and 2011 under each of the following methods: 1. Straight-line 2. Hours worked 3. Units of output 4. Sum-of-the-years'-digits 5. Double-declining-balance 6. 150%-declining-balance 7. Compute the company's return on assets (net income divided by average total assets, as discussed in Chapter 6) for each method for 2010 and 2011, assuming that income before depreciation is $100,000. For simplicity, use ending assets, and P11-1 Depreciation Methods ignore interest, income taxes, and other assets. (round all percentages to one decimal place) Name: Marjorie Bowden An asterisk (*) will appear next to an incorrect amount(s) in the outlined cell(s). If you are still getting a red asterisk, and think the answer is correct, but used a formula in the cell try manually typing in the answer according to the rounding instructions. Required Compute the depreciation for 2010 and 2011 under each of the following methods: 1. Straight-line 2. Hours worked 3. Units of output 4. Sum-of-the-years'-digits 5. Double-declining-balance 6. 150%-declining-balance Method Method Calculation Rate of Depreciation 2010 2011 (round to the nearest dollar) 1. Straight-line: $650,000 = $32,500 32,500 32,500 20 per year 2. Hours worked $650,000 = $6.50 29,250 35,750 100,000 per hour 3. Units of output $650,000 = $0.68 27,200 40,800 950,000 per unit 4. Sum-of-the-years'-digits: 20 = 0.1 61,905 58,810 210 2010 Rate 5. Double Declining Balance (Multiply the numerator by 2) 2 = 10.0% 70,000 63,000 20 per year 6. 150% declining balance (Multiply the numerator by 1.5) 1.5 = 7.5% 52,500 48,563 20 per year 7. Compute the company's return on assets (net income divided by average total assets, as discussed in Chapter 6) for each method for 2010 and 2011, assuming that income before depreciation is $100,000. For simplicity, use ending assets, and 2010 2011 2010 2011 $100,000 - CY Depr $100,000 - CY Depr $700,000 - CY Depr $700,000 - (CY Depr + PY Depr) (round to one decimal place) Straight Line $67,500 $67,500 10.1% 10.6% 667,500 635,000 Hours worked $70,750 $64,250 10.5% 10.1% 670,750 635,000 Units of output $72,800 $59,200 10.8% 9.4% 672,800 632,000 Sum-of-the-years' -digits $38,095 $41,190 6.0% 7.1% 638,095 579,285 Double-declining balance $30,000 $37,000 4.8% 6.5% 630,000 567,000 150%-declining balance $47,500 $51,437 7.3% 8.6% 647,500 598,937 CY = Current Year Depr = Depreciation PY = Prior Year P11-1 Depreciation Methods ignore interest, income taxes, and other assets. (round all percentages to one decimal place) Formula for Return on Total Assets +(see below) + Legend: Name: Solutions...
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AC301-03_Marjorie Bowden-Project-Unit 5 - The Winsey...

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