KNO Enterprises begins construction of an asset on January 1, 2014, and complete
ID: 2508127 • Letter: K
Question
KNO Enterprises begins construction of an asset on January 1, 2014, and completes construction on December 31, 2014. KNO Enterprises pays the following amounts related to construction:
Calculate the average accumulated expenditures for the purpose of capitalizing interest.
Do not round intermediate calculations. If required, round your final answer to the nearest dollar.
$
Part B
KNO Enterprises purchased an asset on January 1, 2014, for $9,300. The asset was expected to have a ten-year life and a $1,000 salvage value. KNO Enterprises uses the straight-line method of depreciation. On January 1, 2016, KNO Enterprises made a major repair to the asset of $5,000, extending its life. The asset is expected to last ten years from January 1, 2016.
Calculate the amount of depreciation for 2016.
$920,000 January 1 $2,000,000 July 1 $1,000,000 December 1Explanation / Answer
1-
Month
amount outstanding
period for which amount is outstanding
1-Jan
920000
6
5520000
1-Jul
2920000
5
14600000
1-Dec
3920000
1
3920000
total of accumulated expenditure duing the year
24040000
Average accumulated expenditure
24040000/12
2003333.333
2-
cost of machine on purchase
9300
less scrap value
1000
amount to be depreciated
8300
life of machine
10
annual depreciation
8300/10
830
Depreciation accumulated during the 2 year period
830*2
1660
balance in book value of machine at jan 1 2016
8300-1660
6640
major repair
5000
new book value of machine
11640
life of machine
10
annual depreciation in year 2016
11640/10
1164
1-
Month
amount outstanding
period for which amount is outstanding
1-Jan
920000
6
5520000
1-Jul
2920000
5
14600000
1-Dec
3920000
1
3920000
total of accumulated expenditure duing the year
24040000
Average accumulated expenditure
24040000/12
2003333.333
2-
cost of machine on purchase
9300
less scrap value
1000
amount to be depreciated
8300
life of machine
10
annual depreciation
8300/10
830
Depreciation accumulated during the 2 year period
830*2
1660
balance in book value of machine at jan 1 2016
8300-1660
6640
major repair
5000
new book value of machine
11640
life of machine
10
annual depreciation in year 2016
11640/10
1164
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