[The following information applies to the questions displayed below.) Hulme Comp

Question

[The following information applies to the questions displayed below.) Hulme Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2017, an asset account for the company showed the following balances: Manufacturing equipment Accumulated depreciation through 2016 $ 136,000 56,000 During 2017, the following expenditures were incurred for the equipment: Routine maintenance and repairs on the equipment Major overhaul of the equipment that improved efficiency on January 2, 2017 $900 5,000 The equipment is being depreciated on a straight-line basis over an estimated life of 17 years with a $17,000 estimated residual value. The annual accounting period ends on December 31.

Explanation / Answer

Particulars Calculations Amount Per year depreciation ( straight line)( (136000-17000)/17 7000 Carrying value of the equipment (136000-56000) 80000 New carrying value of equipment (80000+5000) 85000 Estimated remaining life (17-(56000/7000)) 9 Added depreciation value (5000/9) 555.5556 New depreciation (7000+555.56) 7555.556 Adjusting Entry Accounts and Explanation Debit Credit Depreciation Expenses 7556 Accumulated depreciation on equipment 7556 ( To record the adjusting entry for the depreciation on equipment)

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