1) A used machine with a purchase price of $34,025.00, requiring an overhaul cos
ID: 2462740 • Letter: 1
Question
1) A used machine with a purchase price of $34,025.00, requiring an overhaul costing $9,914.00, installation costs of $5,170.00, and special acquisition fees of $5,065.00. would have a cost basis of
Select the correct answer.
A) 34,025
B) 74,323
C) 54,174.00
D) 43,939
2) A machine with a cost of $78,653.00 has an estimated residual value of $4,934.00 and an estimated life of 7 years or 15,898 hours. It is to be depreciated by the units-of-production method. What is the amount of depreciation for the second full year, during which the machine was used 4,994 hours?
Select the correct answer.
A) 21,062.57
B) 24,707.08
C) 10,531.29
D) 23,157.17
3) A machine with a cost of $69,200.00 has an estimated residual value of $3,428.00 and an estimated life of 5 years or 17,420 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?
A) 27,680.00
B) 13,840.00
C) 16,608.00
D) 26,308.80
Explanation / Answer
1) A used machine with a purchase price of $34,025.00, requiring an overhaul costing $9,914.00, installation costs of $5,170.00, and special acquisition fees of $5,065.00. would have a cost basis of $ 54,174 (Total of all four amounts). 2) A machine with a cost of $78,653.00 has an estimated residual value of $4,934.00 and an estimated life of 7 years or 15,898 hours. It is to be depreciated by the units-of-production method.The amount of depreciation for the second full year, during which the machine was used 4,994 hours will be calculated as under : ($ 78,653 - $ 4,934) / 15,898 X 4,994 = 23157.17 $ 3) A machine with a cost of $69,200.00 has an estimated residual value of $3,428.00 and an estimated life of 5 years or 17,420 hours.The amount of depreciation for the second full year, using the double declining-balance method, will be worked out as under Year Book Value Depreciation Rate Depreciation WDV 40% (5 years means 20%, double-declining is twice this rate) 1 65772 40% 26308.8 39463 2 39463 40% 26308.8 13154 Thus, the depreciation for the second year will be $ 26,308.80.
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