14.28 points Exercise 8-4 Straight-line depreciation LO P1 In early January 2013
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Question
14.28 points Exercise 8-4 Straight-line depreciation LO P1 In early January 2013, NewTech purchases computer equipment for $154,000 to use in operating activities for the next four years. It estimates the equipment's salvage value at $25,000. Prepare a table showing depreciation and book value for each of the four years assuming straight-line Inator.Annual Depreciation = Depreciation Expense choose Numerator: Choose Denominator: Expense Year Annual Depreciation 2013 2014 2015 2016 Total Year-End Book Value References eBook & Resources Expanded table Difficulty: 2 Medium MacBook Pro F2 F3 F5 2 3 4 6Explanation / Answer
Answers
Choose Numerator
/
Choose Denominator
=
Annual Depreciation Expense
[Cost - Salvage value]
/
Useful Life
=
Depreciation expense
[154000 - 25000]
/
4 years
=
SLM Depreciation
$ 129,000.00
/
4
=
$ 32,250.00
Year
Annual Depreciation
Year End Book Balance
2013
$ 32,250.00
$ 121,750.00
2014
$ 32,250.00
$ 89,500.00
2015
$ 32,250.00
$ 57,250.00
2016
$ 32,250.00
$ 25,000.00
Total
$ 129,000.00
---Working
Choose Numerator
/
Choose Denominator
=
Annual Depreciation Expense
[Cost - Salvage value]
/
Useful Life
=
Depreciation expense
[23860 - 2400]
/
4 years
=
SLM Depreciation
$ 21,460.00
/
4
=
$ 5,365.00
Answers
Working
Book Value at the end of Year 2
A [given]
Cost
$ 23,860.00
B = $ 5365 calculated above x 2 years
Accumulated Depreciation 2 years
$ 10,730.00
C = A- B
Book Value at the point of revision
$ 13,130.00
Working
Revised Depreciation (Year 3-5)
A
Book Value at the point of revision
$ 13,130.00
B
Less: Revised Salvage value
$ 2,000.00
C=A-B
Remaining depreciable cost
$ 11,130.00
D
Year of life remaining
3
E=C/D
Depreciation year 3-5
$ 3,710.00
Date
Accounts title
Debit
Credit
01-Jan-13
Copyrights
$ 418,000.00
Cash
$ 418,000.00
(copyright purchased)
31-Dec-13
Amortisation Expense [418000/11 years]
$ 38,000.00
Accumulated Amortisation
$ 38,000.00
(adjusting entry for amortisation)
Allocation of Total Cost
Appriased Value
% of total appraised value
Total cost of acquisition
Apportioned Cost
Building
$ 508,800.00
53%
$ 900,000.00
$ 477,000.00
Land
$ 297,600.00
31%
$ 900,000.00
$ 279,000.00
Land Improvements
$ 28,800.00
3%
$ 900,000.00
$ 27,000.00
Vehicles
$ 124,800.00
13%
$ 900,000.00
$ 117,000.00
Total
$ 960,000.00
100%
$ 900,000.00
Date
Accounts title
Debit
Credit
Jan-01
Building
$ 477,000.00
Land
$ 279,000.00
Land Improvements
$ 27,000.00
Vehicles
$ 117,000.00
Cash
$ 900,000.00
(lumpsum purchases recorded)
---Working for answering 2nd & 3rd requirements
Working
Building
Land Improvements
A
Cost apportioned
$ 477,000.00
$ 27,000.00
B
Salvage Value
$ 27,000.00
$ -
C=A-B
Depreciable cost
$ 450,000.00
$ 27,000.00
D
Useful Life
15
5
E=C/D
Annual SLM depreciation
$ 30,000.00 [Answer 2]
$ 5,400.00
F=(E/C) x 100
SLM rate
6.67%
20.00%
G = F x 2
Double declining rate
13.33%
40.00% [Required for Answer 3]
Answers
Depreciation expense on Building
$ 30,000.00
Depreciation expense on Land Improvement
$ 10,800.00
[$27,000 cost x 40% rate of DDB]
Choose Numerator
/
Choose Denominator
=
Annual Depreciation Expense
[Cost - Salvage value]
/
Useful Life
=
Depreciation expense
[154000 - 25000]
/
4 years
=
SLM Depreciation
$ 129,000.00
/
4
=
$ 32,250.00
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