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(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 which the largest amount of depreciation is recognized in the early years of the asset’s life. If the

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straight-line method is used, the same amount of depreciation expense is recognized each year.
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(Solution) Assignment for Chapter 10 - Assignment for...

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