# And for the total five year period assuming straight

• 140
• 100% (1) 1 out of 1 people found this document helpful

This preview shows page 119 - 121 out of 140 pages.

and for the total five-year period, assuming straight-line depreciation. Exercise 8-10 Double-declining-balance depreciation P1 Tory Enterprises pays \$238,400 for equipment that will last five years and have a \$43,600 salvage value. By using the equipment in its operations for five years, the company expects to earn \$88,500 annually, after deducting all expenses except depreciation. Prepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five-year period, assuming double-declining-balance depreciation is used. Check Year 3 NI, \$54,170 Exercise 8-11 Straight-line, partial-year depreciation C2 On April 1, 2016, Cyclone’s Backhoe Co. purchases a trencher for \$280,000. The machine is expected to last five years and have a salvage value of \$40,000. Compute depreciation expense for both 2016 and 2017 assuming the company uses the straight-line method. Exercise 8-12 Double-declining-balance, partial-year depreciation C2 On April 1, 2016, Cyclone’s Backhoe Co. purchases a trencher for \$280,000. The machine is expected to last five years and have a salvage value of \$40,000. Compute depreciation expense for both 2016 and 2017 assuming the company uses the double-declining-balance method.
Exercise 8-13 Revising depreciation C2 Apex Fitness Club uses straight-line depreciation for a machine costing \$23,860, with an estimated four-year life and a \$2,400 salvage value. At the beginning of the third year, Apex determines that the machine has three more years of remaining useful life, after which it will have an estimated \$2,000 salvage value. Compute (1) the machine’s book value at the end of its second year and (2) the amount of depreciation for each of the final three years given the revised estimates. Check (2) \$3,710 Exercise 8-14 Ordinary repairs, extraordinary repairs, and betterments C3 Oki Company pays \$264,000 for equipment expected to last four years and have a \$29,000 salvage value. Prepare journal entries to record the following costs related to the equipment. 1. During the second year of the equipment’s life, \$22,000 cash is paid for a new component expected to increase the equipment’s productivity by 10% a year. 2. During the third year, \$6,250 cash is paid for normal repairs necessary to keep the equipment in good working order. 3. During the fourth year, \$14,870 is paid for repairs expected to increase the useful life of the equipment from four to five years. Page 390 Exercise 8-15 Extraordinary repairs; plant asset age C3 Martinez Company owns a building that appears on its prior year-end balance sheet at its original \$572,000 cost less \$429,000 accumulated depreciation. The building is depreciated on a straight-line basis assuming a 20-year life and no salvage value. During the first week in January of the current calendar year, major structural repairs are completed on the building at a \$68,350 cost. The repairs extend its useful life for 5 years beyond the 20 years originally estimated.