1.A piece of Machinery was purchased on January 1, 2005 for $75,000. It was esti
ID: 2500091 • Letter: 1
Question
1.A piece of Machinery was purchased on January 1, 2005 for $75,000. It was estimated to have salvage value of $15,000 and a useful life of five years, or 10,000 hours. During 2005 the machine was used 1,910 hrs, 2006 2,095 hrs, 2007 2,280 hrs, 2008 2,210 hrs, 2009 1,505 hrs Required: A. Determine the amount of depreciation for each year using the following depreciation methods: Declining Balance, Straight line, &Units; of Activity. Show all work B. At the end of 2007 what was the accumulated depreciation for each method? C. What was the book value at December 31, 2008 under earch method? D. What is the depreciable base for each method? 2. On January 2, 2005 Bard Company purchased equipment for $24,000. The equipment had accumulated depreciation of $14,310 at December 31, 2008. Required: Make the journal entries for each of the following transactions using the above equipment. A. On December 31, 2008 the equipment was sold for $5,000. ante n.·A-') B On December 31, 2008 the equipment was disposed for no money C. On December 31, 2008 the equipment was sold for $127 3. At the end of November the payroll register for Laser Inc. Contained the following totals: uctions are: Federal Income Tax $4,700 Office Wages $14,400 Factory wages $24,500; Deductions are: F State Income Tax $1,600, Fica Tax $3,112, Union Dues $740, and United Way $800. Il summary as of November 30, 2008 Required: A. Record the November Payroll summary as of November 3 Record the payment of the November payroll to the employees on Dec 3, 2008. C. Record the accrual of the employers payroll taxes as of November 30, 2008. Assume the Fica rate is 8%. The Unemployment rates are .8% for Federal and 3.6% for State. All wages were subjectto Fica tax and $28,700 are subject to Unemployemnt taxes. D. Record the payment of Union dues on December 8, 2008. E. Record the payment of the Federal Income Tax and the Fica taxes owed for November and paid December 15, 2008.Explanation / Answer
Straight line method =Asset value-scrap value/life of the asset
=$75,000-$15,000/5= $12000
B)End of 2007 Accumulated depreciation in Straight line method(12000+12000+12000)=$36000
C)Book value at Dec 31st 2008=75000-15000-$48000=$12000
(4*12000=$48000)
Declining Balance method:
Useful life = 5 years --> Straight line depreciation rate = 1/5 = 20% per year
Depreciation rate for declining balance method
B) At the end of 2007 accumulated depreciation
in 2005 75000*20%=15000
in 2006 (75000-15000)*20%=12000
in 2007 (75000-15000-12000)*20%=9600
Accumulated Depreciation =15000+12000+9600=$36600
Book value at Dec'2008
in 2008 (75000-15000-12000-9600)*20%=$7680
=75000-15000-12000-9600-7680=$30720
Units of Activity method:
Depreciable base=Asset cost -salvage value=75000-15000=$60000
Depreciation per hour used=$60000/10000=6hrs
in 2005 machine used 1910hrs=1910*6=11460$
in 2006 machine used 2095hrs =2095*6=12570$
in 2007 machine used 2280hrs=2280*6=13680$
in 2008 machine used 2210hrs=2210*6=13260$
in 2007 Accumulated dep=11460+12570+13680=37710$
in 2008 Bookvalue 60000-50970=$9030
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