16. Tranquil Company purchased the following assets on October 1, 2014: Cost Res

Question

16. Tranquil Company purchased the following assets on October 1, 2014: Cost Residual Building Machinery Equipment $600,000 $200,000 $300,000 $1,100,000 Value 25% 10% 25% Method Straight Linde Sum of the Years Double Declining Balance Useful Life 25 years 6 Years 8 years Utilize the above information to calculate Tranquil's 2015 Depreciation Expense. Rounding: Do not round your Sum-of-the-years-digit factor when utilizing it within your calculations. Do round your final answers (for all calculations) to the nearest S1. A. $173,706 B. $148,527 C. $117,107 D. $127,353 E. $137,599 2

Explanation / Answer

Answer

Working

Building

Working

Cost

600000

Residual Value 25%

150000

Depreciable base

450000

[600000-150000]

Life [in years]

25

Annual SLM depreciation

18000

450000/25

Dep 2014: from1 Oct to Dec 31

4500

A

2015 Depreciation

$18,000

=Annual SLM depreciation

Machinery

Cost

200000

Residual value [10%]

20000

Depreciable base

180000

Sum of digits [1+2+3+4+5+6]

21

Year 1 Depreciation : 1 Oct 2014 to 30 Sept 2015

51428.571

[180000 x 6/21]

2015 Depreciation from above [Jan to Sept]

38571.429

[51428.571x9/12]

Year 2 Depreciation : 1 Oct 2015 to 30 Sept 2016

42857.143

[180000 x 5/21]

2015 Depreciation from above [Oct to Dec]

10714.286

[42857.143 x 3/12]

B

Total 2015 Depreciation

$49,285.714

[38571 + 10714]

Equipment

Cost

300000

Year 1 Depreciation : 1 Oct 2014 to 30 Sept 2015

75000

[300000 x 25%]

2015 Depreciation from above [Jan to Sept]

56250

[75000 x 9/12]

Year 2 Depreciation : 1 Oct 2015 to 30 Sept 2016

56250

[225000 x 25%]

2015 Depreciation from above [Oct to Dec]

14062.5

[56250 x 3/12]

C

Total 2015 Depreciation

$70,312.5

[56250 + 14062.5]

A+B+C

Total 2015 Depreciation expenses

$137,598.21

Working

Building

Working

Cost

600000

Residual Value 25%

150000

Depreciable base

450000

[600000-150000]

Life [in years]

25

Annual SLM depreciation

18000

450000/25

Dep 2014: from1 Oct to Dec 31

4500

A

2015 Depreciation

$18,000

=Annual SLM depreciation

Machinery

Cost

200000

Residual value [10%]

20000

Depreciable base

180000

Sum of digits [1+2+3+4+5+6]

21

Year 1 Depreciation : 1 Oct 2014 to 30 Sept 2015

51428.571

[180000 x 6/21]

2015 Depreciation from above [Jan to Sept]

38571.429

[51428.571x9/12]

Year 2 Depreciation : 1 Oct 2015 to 30 Sept 2016

42857.143

[180000 x 5/21]

2015 Depreciation from above [Oct to Dec]

10714.286

[42857.143 x 3/12]

B

Total 2015 Depreciation

$49,285.714

[38571 + 10714]

Equipment

Cost

300000

Year 1 Depreciation : 1 Oct 2014 to 30 Sept 2015

75000

[300000 x 25%]

2015 Depreciation from above [Jan to Sept]

56250

[75000 x 9/12]

Year 2 Depreciation : 1 Oct 2015 to 30 Sept 2016

56250

[225000 x 25%]

2015 Depreciation from above [Oct to Dec]

14062.5

[56250 x 3/12]

C

Total 2015 Depreciation

$70,312.5

[56250 + 14062.5]

A+B+C

Total 2015 Depreciation expenses

$137,598.21

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