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C-10_PP_E_Depreciation_Examples - method d Given GAAP’s...

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ACCT 100 Spring 2009 Chapter 10: Plant Assets, Natural Resources and Intangible Assets: Property, Plant and Equipment On January 1 st , 2000, Fog Covered Vineyards purchased a grape harvesting machine for $120,000. The company estimates it will sell the machine at the end of the 4 th year for $20,000. The machine is expected to harvest 50,000 tons of grapes over its useful life. The tonnage harvested each of the four years is as follows: Fiscal Year Tons of Grapes Harvested 2000 15,000 2001 20,000 2002 10,000 2003 5,000 a) Using the straight-line depreciation method, what would be the forklift's book value at the end of the second year? b) Using the units-of-production method , what would be the depreciation expense in 2000 and 2001?
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c) Compute the depreciation for each year if the company uses the double-declining balance
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Unformatted text preview: method . d) Given GAAP’s general approach to financial reporting, particularly the matching principle, which of the three depreciation methods would be the most appropriate method and why? e) Compute the gain or loss resulting from the sell of the harvesting machine for $60,000 at the end of the second year (assume straight line). Be sure to label it as a gain or a loss. Natural Resources Depletion Example-Appalachian Coal Co. purchased a coal mine that is expected to produce 17,500 tons of coal. The total acquisition cost of the mine was $550,000. The company plans to keep the mine for 7 years after which it will sell the mine’s remnants for $25,000. During the first year of operation, 2,500 tons of coal was excavated from the mine....
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