Depreciation EXERCISE Indicate the best answer for each question in the space pr

Question

Depreciation EXERCISE Indicate the best answer for each question in the space provided Use the following data for the four independent questions which follow: On May 5, 2009. Lloyd purchased a machine for $84,000. The estimated life of the machine was 10 years, with an estimated residual value of $10,000 The service life in terms of "output" is estimated at 8,000 hours of operation Refer to the above data Assume Lloyd uses straight-line deprecation with the half-year convention Depreciation expense to be recognized in 2009 (the year of purchase) is: $7,400 $8,400 $3,700 Some other amount Refer to the data above. Assume Lloyd uses 200%-declining-balance depreciation with the half-year convention Depreciation expense to be recognized in 2010 (the second year of ownership) is $8,400 $13,120 $15,120 Some other amount Refer to the data above. Assume Lloyd uses 150% declining-balance deprecation with the half-year convention Depreciation expense to be recognized in 2009 (the year of purchase) $8,400 $6,300 $12,600 Some other amount Refer to the data above. Assume Lloyd uses the units-of output method and that the machine was in operation for 1,000 hours in 2009 and 1,800 hours in 2010 The book value of the machine at December 31, 2010 is: S48.IOO $58,100 $25,900 Some other amount

Explanation / Answer

Ans 1 Depreciation = $84000-10000/10 $7,400 Half Year Convention $7400*.5 3700 Ans Ans 2 Depreciation in first year= Cost*1/useful life*A*depreciation Convention 84000*1/10*200%*1/2 8400 Depreciation in second year=(Cost-Depreciation in previous year)*1/Recover Period*A (84000-8400)*1/10*200% 15120 $ Ans Ans 3 Depreciation in first year= Cost*1/useful life*A*depreciation Convention 84000*1/10*150%*1/2 6300 Ans Ans 4 Depreciation for two years=No of units produced/life inno. Of unit*(Cost-salvage value) 1000+1800/8000*(84000-10000) 25900 Book Value as om Dec 2010=$84000-25900 58100 Ans

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