Financial Accounting Post Exam Project #2
Accounting 1B - Post Exam 2 Project
1. Jensen Company purchased a new machine on September 1, 2012, at a cost of $128,000. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 80,000 working hours during its 8-year life.
Instructions:
Compute depreciation using the following methods in the year indicated.
(a) Straight-line for 2012 and 2013, assuming a December 31 year-end.
(b) Declining-balance using double the straight-line rate for 2012 and 2013.
(c) Units-of-activity for 2012, assuming machine usage was 2,900 hours. (Round depreciation per unit to the nearest cent.) A) 15,000 1 / 8= .125 128,000-8,000=120,000 120,000 x .125= $15,000 B) 32,000 128,000 x 25% = 32,000 C) 4,350 120,000 / 80,000 = 1.50 1.50 x 2,900 = 4,350
2. Nichols Company purchased a new machine for $200,000. It is estimated that the machine will have a
$20,000 salvage value at the end of its 5-year useful service life. The double-declining-balance method of depreciation will be used.
Instructions:
Prepare a depreciation schedule that shows the annual depreciation expense on the machine for its 5- year life.
200,000 – 20,000 = 180,000 180,000 / 5 = 36,000 for 1 year 1 / 5 = 20% (Doubles to 40%) Computation | Annual Depreciation Expense | End of Year | Year | Depreciable Cost | Depreciable Rate | | Accumulated Depreciation | Book Value | 2010 | 180,000 x | 40% = | 36,000 | 36,000 | 164,000 | 2011 | 180,000 x | 40% = | 36,000 | 72,000 | 128,000 | 2012 | 180,000 x | 40% = | 36,000 | 108,000 | 92,000 | 2013 | 180,000 x | 40% = | 36,000 | 144,000 | 56,000 | 2014 | 180,000 x | 4 0% = | 36,000 | 180,000 | 20,000 | | | | Total: 180,000 | | |
3. Railsback Company purchased a machine on January 1, 2012, at a cost of $64,000. The machine is expected to have an estimated salvage value of $4,000 at the end of its 5-year life. The company capitalized the machine and depreciated it in 2012
1. Jensen Company purchased a new machine on September 1, 2012, at a cost of $128,000. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 80,000 working hours during its 8-year life.
Instructions:
Compute depreciation using the following methods in the year indicated.
(a) Straight-line for 2012 and 2013, assuming a December 31 year-end.
(b) Declining-balance using double the straight-line rate for 2012 and 2013.
(c) Units-of-activity for 2012, assuming machine usage was 2,900 hours. (Round depreciation per unit to the nearest cent.) A) 15,000 1 / 8= .125 128,000-8,000=120,000 120,000 x .125= $15,000 B) 32,000 128,000 x 25% = 32,000 C) 4,350 120,000 / 80,000 = 1.50 1.50 x 2,900 = 4,350
2. Nichols Company purchased a new machine for $200,000. It is estimated that the machine will have a
$20,000 salvage value at the end of its 5-year useful service life. The double-declining-balance method of depreciation will be used.
Instructions:
Prepare a depreciation schedule that shows the annual depreciation expense on the machine for its 5- year life.
200,000 – 20,000 = 180,000 180,000 / 5 = 36,000 for 1 year 1 / 5 = 20% (Doubles to 40%) Computation | Annual Depreciation Expense | End of Year | Year | Depreciable Cost | Depreciable Rate | | Accumulated Depreciation | Book Value | 2010 | 180,000 x | 40% = | 36,000 | 36,000 | 164,000 | 2011 | 180,000 x | 40% = | 36,000 | 72,000 | 128,000 | 2012 | 180,000 x | 40% = | 36,000 | 108,000 | 92,000 | 2013 | 180,000 x | 40% = | 36,000 | 144,000 | 56,000 | 2014 | 180,000 x | 4 0% = | 36,000 | 180,000 | 20,000 | | | | Total: 180,000 | | |
3. Railsback Company purchased a machine on January 1, 2012, at a cost of $64,000. The machine is expected to have an estimated salvage value of $4,000 at the end of its 5-year life. The company capitalized the machine and depreciated it in 2012