Recitation- Ch 10 solutions

Recitation- Ch 10 solutions - (5-10 min.) E 10-16CAPITAL...

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Unformatted text preview: (5-10 min.) E 10-16CAPITAL EXPENDITURES:(a) purchase price, (c) lubrication before machine is placed in service, (e) major overhaul, (f) sales tax, (g) transportation and insurance, (h) installation, (i) training of personnelEXPENSES:(b) ordinary recurring repairs, (d) periodic lubrication, (j) income tax(5-10 min.) E 10-171. Equipment is understatedby $500,000.2. Net income is understatedby $500,000.(10-15 min.) E 10-18Depreciation is the process of allocating a plant assets cost to expense over its useful life. The primary purpose of depreciation accounting is to match expense against revenues in order to measure net income. Lake is correct that depreciation can relate to the wear and tear of an asset. However, the depreciation of some assets is more affected by obsolescence than by physical wear and tear.Gerbing is wrong. Depreciation has nothing to do with cash. (10-15 min.) E 10-19DEPRECIATION EXPENSE PER YEARYearStraight-LineUnits-of-ProductionDouble-Declining-Balance2007$ 3,000$ 1,200$ 7,50020083,0003,6003,75020093,0004,80037520103,0002,400375$12,000$12,000$12,000__________Computations:Straight-line: ($15,000 $3,000) 4 = $3,000 per year.Units-of-production: ($15,000 $3,000) 3,000operations = $4 per job;300 $4 = $1,200; 900 $4 = $3,600; 1,200 $4 =...
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Recitation- Ch 10 solutions - (5-10 min.) E 10-16CAPITAL...

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