1. Derter industries punhosed packaging equipment on January 8 for 57200 The equ

Question

1. Derter industries punhosed packaging equipment on January 8 for 57200 The equoment wa·xpected to have hours during Year 1, 6.000 hours in Year 2, and 4400 hours in Year 3 a. Determine the amount of depreciation espense for the three years ending December 31 by la) the straight-lee ue of $4,500. The equipment was uned for 7 ,800 mechod, Ob the units of-activity method, and (c) the double declining balance method. Also determine the total depreciation expense for the three years by each method. What method yields the highest degreciation expense for Year 1 c what method yields the most depreciation over the three-year life of the equipment? 2.New ithopraphic equipment, acquired at a cost of $800,000 on March 1 of Year 1 (beginning of the fiscal year), has an estimated useful sfe of five years and an estimated regarding the effect of residual value et $90,000. The manager requested information alternative methods on the amount of depreciation expense each year On March 4 of Year 5, the equipment was sold for $135,000. a. Determine the at the end of each (bj the double-declining-balance method nnual depreciation expense for each of the estimated five years of use, the accumulated depreciation vear, and the book value of the equipment at the end of each year by (a) the straight-line method and the entry to record the sale assuming that the manager chose the double-declining-balance method c. Journalize the entry to record the sale in (2) assuming that the equipment was sold for S88,750 instead of $1 35,000 to 3. Thomson 900,000 o, 10-year, 7% bonds on May 1 of the current year at face value, with interest payable on Man and Co. produces and distributes semiconductors for use by computer manufacturers. Thomson Co. issued 1. The fiscal year of the company is the calendar year lournalize the entries to record the following selected transactions for the current year May 1. Issued the bonds for cash at their face amount. Now. 1. Paid the interest on the bonds. Dec. 31. Recorded accrued interest for two months. 4. Adele Corp., a wholesaler of music equipment, issued S22,000,000 of 20-year, 7% callable bonds on March 1, 20n, at their face amount, with interest payable on March 1 and September 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: 20Y1 Mar. Issued the bonds for cash at their face amount. Sept.1 Paid the interest on the bonds Sept.1 Called the bond issue at 102, the rate provided in the bond indenture. (Omit entry for payment 1. 20YS of interest.) 5. On anuary 1 Year 1, B son Company obtained a $147,750, four-year, 7% installment note fro n Campbell Bank. The note requires annual payments of $43,620, beginning on December 31, Year 1. a. Prepare an amortization table for this installment note

Explanation / Answer

1. Dexter Industries

b. The double-declining-balance method yields the highest depreciation for Year 1.

c. All the three methods yield the same depreciation over the three-year life of the equipment.

Workings:

Depreciable cost = $72000 - $4500 = $67500

(a) Straight-line method:

Annual depreciation = $67500/3 years = $22500

(b) Units-of-activity method:

Depreciation per operating hour = $67500/18000 = $3.75

Year 1: 7600 x $3.75 = $28500

Year 2: 6000 x $3.75= $22500

Year 3: 4400 x $3.75= $16500

(c) Double-declining-balance method:

Straight-line depreciation rate = 100%/3 years = 33.3333%

Double declining depreciation rate = 200% x 33.33% = 66.6667%

Year 1: $72000 x 66.6667% = $48000

Year 2: ($72000 - $48000) x 66.6667% = $24000 x 66.6667% = $16000

Year 3: ($72000 - $4500) - ($48000 + $16000) = $67500 - $64000 = $3500

Per Chegg guidelines, please post independent questions separately. Thank you.

a. Depreciation Expense Year 1 Year 2 Year 3 Total (a) Straight-line method 22500 22500 22500 67500 (b) Units-of-activity method 28500 22500 16500 67500 (c) Double-declining-balance method 48000 16000 3500 67500

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