Purchase price 63000 Delivery cost 2000 Installation charge 3000 Estimated

# Purchase price 63000 delivery cost 2000 installation

This preview shows page 28 - 32 out of 53 pages.

Purchase price \$ 63,000 Delivery cost \$ 2,000 Installation charge \$ 3,000 Estimated useful life 8 years Estimated units the machine will produce 130,000 Estimated salvage value \$ 3,000
The machine produced 14,400 units during 2016 and 17,000 units during 2017. Required Determine the depreciation expense Bakersfield would report for 2016 and 2017 using each of the following methods. 1. Straight-line. 2. Double-declining-balance. 3. Units-of-production. Solution to Requirements a c. 1. Straight-line Purchase price \$63,000 Delivery cost 2,000 Installation charge 3,000 Total cost of machine 68,000 Less: Salvage value (3,000) \$65,000 ÷ 8 = \$8,125 Depreciation per year 2016 \$ 8,125 2017 \$ 8,125 2. Double-declining-balance Year Cost Accumulated Depreciation at Beginning of Year × 2 × S-L Rate = Annual Depreciation 2016 \$68,000 \$ 0 × (2 × 0.125) = \$17,000 2017 68,000 17,000 × (2 × 0.125) = 12,750 Page 230 3. Units-of-production 1. (Cost− Salvage value) ÷ Estimated units of production = Depreciation cost per unit produced 2. Cost per unit × Annual units produced = Annual depreciation expense KEY TERMS Accelerated depreciation method 214
Accumulated Depreciation 212 Amortization 208 Basket purchase 209 Book value 212 Capital expenditures 220 Contra asset account 212 Copyright 223 Current assets 206 Depletion 208 Depreciable cost 210 Depreciation 208 Depreciation expense 210 Double-declining-balance depreciation 214 Estimated useful life 210 Franchise 223 Goodwill 224 Historical cost concept 209 Intangible assets 208 Long-term operational assets 206 Natural resources 208 Patent 222 Property, plant, and equipment 208 Relative fair market value method 209 Revenue expenditures 219
Salvage value 210 Straight-line depreciation 211 Tangible assets 208 Trademark 222 Units-of-production depreciation 217 QUESTIONS 1.What is the difference between the functions of long-term operational assets and investments? 2.What is the difference between tangible and intangible assets? Give an example of each. 3.What is the difference between goodwill and specifically identifiable intangible assets? 4.Define depreciation. What kind of asset depreciates? 5.Why are natural resources called wasting assets? 6.Is land a depreciable asset? Why or why not? 7.Define amortization. What kind of assets are amortized? 8.Explain the historical cost concept as it applies to long-term operational assets. Why is the book value of an asset likely to be different from the current market value of the asset?

#### You've reached the end of your free preview.

Want to read all 53 pages?