XYZ Enterprises purchased equipment for $70,000 on July 1, 2013. The equipment i

Question

XYZ Enterprises purchased equipment for $70,000 on July 1, 2013. The equipment is expected to have a five-year life and a residual value of $10,000. Using the sum-of-years'-digits method, the net book value of XYZ’s equipment on December 31, 2014, would be (omit $ and , in the answer):

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Question 41 pts

XYZ Enterprises purchased equipment for $70,000 on July 1, 2013. The equipment is expected to have a five-year life and a residual value of $10,000. Using the double-declining balance method, accumulated depreciation for XYZ’s equipment on December 31, 2014 would be (omit $ and , in the answer):

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Question 51 pts

At the end of its 2015 fiscal year, a triggering event caused XYZ Enterprises to perform an impairment test for one of its manufacturing facilities. The following information is available for the facility as of Dec. 31, 2015:

Original cost $90 million

Accumulated depreciation $35 million

Estimated undiscounted future cash flows $60 million

Fair value $50 million

Based on this information, XYZ should record:

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Question 61 pts

During 2015, XYZ Enterprises sold a piece of machinery, which originally cost $50,000, for $16,000. This sale resulted in a loss of $4,000. Also during 2015, XYZ’s Accumulated Depreciation account (for all fixed assets) increased from $145,000 to $170,000. How much did XYZ report as Depreciation Expense for 2015 (for all fixed assets)?

Explanation / Answer

Answer 1. Depreciation of 1 Year as per Sum of Digit Method = ($70,000(Cost) - $10,000 (Salvage Value)) X 5/15 = 20000 Depreciation of 2 Year as per Sum of Digit Method = ($70,000(Cost) - $10,000 (Salvage Value)) X 4/15 = 16000 Calculation of Book vale of Machinery As on Dec. 31, 2014 Cost of Machine - as on July 1, 2013            70,000 Less: Depreciation - 20000 X 6/12          (10,000) Book Value as on Dec 31, 2013            60,000 Less: Depreciation - (20000 X 6/12) + (16000 X 6/12)          (18,000) Book Value as on Dec 31, 2014            42,000 Answer 2. Depreciation Rate as per straight line Method = 20% Depreciation Rate as per Double Declining Method = 2 X 20% = 40% Calculation of Book vale of Machinery As on Dec. 31, 2014 Cost of Machine - as on July 1, 2013            70,000 Less: Depreciation - (40% of 70000) X 6/12          (14,000) Book Value as on Dec 31, 2013            56,000 Less: Depreciation - 40% of 56000          (22,400) Book Value as on Dec 31, 2014            33,600 Answer 3. Calculation of Book Value at the End of Dec 31, 3015 Purchase Value of Equipment    90,000,000 Less: Accumulated Depreciation    35,000,000 Book Value as on Dec 31, 2015    55,000,000 There is no loss due to impairment. Since Book Value of equipment ($55,000,000) is less than the future Cash inflows (60,000,000) Answer 4. Depreciation exp. For 2015 = $55,000. Accumulated Dep. A/c Machiner A/c            30,000 By Balance C/f          145,000 (50000 - 16000 - 4000) To balance C/f          170,000 By depreciation A/c            55,000 (Bal Fig.)          200,000          200,000

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