(Solution) Assignment for Chapter 10

(Solution) Assignment for Chapter 10 - Assignment for...

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Assignment for Chapter 10 Question 1 (a) (1) Purchase price $ 139,500 Sales tax 6,600 Shipping costs 525 Insurance during shipping 225 Installation and testing 150 Total cost of machinery $ 147,000 Machinery 147,000 Cash 147,000 (2) Recorded cost $ 147,000 Less: Salvage value 15,000 Depreciable cost $ 132,000 Years of useful life ÷ 4 Annual depreciation $ 33,000 Depreciation Expense 33,000 Accumulated Depreciation 33,000 (b) (1) Recorded cost $ 360,000 Less: Salvage value 24,000 Depreciable cost $ 336,000 Years of useful life ÷ 4 Annual depreciation $ 84,000 (2) Year Book Value at Beginning of Year DDB Rate Annual Depreciation Expense Accumulated Depreciation 2008 $360,000 50%* $180,000 $ 180,000 2009 180,000 50% 90,000 270,000 2010 90,000 50% 45,000 315,000 2011 45,000 50% 21,000** 336,000 * 100% ÷ 4-year useful life = 25% x 2 = 50%. ** [($360,000 – $24,000) – $315,000] = $21,000. (3) Depreciation cost per unit = ($360,000 – $24,000)/25,000 units = $13.44 per unit. Annual Depreciation Expense 2008: $13.44 X 6,500 = $87,360 2009: $13.44 X 7,500 = $100,800 2010: $13.44 X 6,000 = $80,640 2011: $13.44 X 5,000 = $67,200 (c) The straight-line method reports the lowest amount of depreciation expense the first year while the declining-balance method reports the highest. In the fourth year, the declining-balance method reports the lowest amount of depreciation expense while the straight-line method reports the highest. These facts occur because the declining-balance method is an accelerated depreciation method in
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This note was uploaded on 02/04/2012 for the course ACCT 2111 taught by Professor Eric during the Spring '11 term at CUHK.

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(Solution) Assignment for Chapter 10 - Assignment for...

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