Question 1 Coronado Company purchased Machine #201 on May 1, 2017, The following
ID: 2581576 • Letter: Q
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Question 1 Coronado Company purchased Machine #201 on May 1, 2017, The following information relating to Machine #201 was gathered at the end of May Price Credit terms Freight-in Preparation and installation costs Labor costs during regular production operations $93,500 2/10, n/30 $ 880 4,180 $11,550 It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Coronado intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $1,650. The invoice for Machine #201 was paid May 5, 2017, Coronado uses the calendar year as the basis for the preparation of financial statements. (a) Compute the depreciation expense for the years indicated using the following methods Depreciation Expense (1) Straight-line method for 2017 (2) Sum-of-the-years'-digits method for 2018 (3) Double-declining-balance method for 2017 Attempts: 0 of 5 used SAVE FOR LATER SUBMIT ANSWERExplanation / Answer
Particulars
Amount
Cost of Machine
93500
- 2% interest
(since amount paid in 5 days)
-1870
Freight exp
880
Preparation and installation costs
4180
Labor costs
11550
Total cost of Machine
108240
DEPRECIATION
Straight line method
Useful life
8
Salvage value
1650
Depreciation for a year
13323.75
(108240-1650)/8
Depreciation from May to December 2017
8882.5
(13323.75*8/12)
Sum of the years' digits method
Depreciated value
106590
(108240-1650)
No of years
8
(1+2+3+4+5+6+7+8)
36
Depreciation for 2018
(106590 * 8 /36 * 4/12) +
(106590 * 7/36 * 8/12)
21713
Double declining method
Straight line percentage
12.50%
(100/8)
So, percentage for double declining method
25%
(12.50 * 2)
Depreciation from May to December 2017
(106590 * 25% * 8/12)
17765
Particulars
Amount
Cost of Machine
93500
- 2% interest
(since amount paid in 5 days)
-1870
Freight exp
880
Preparation and installation costs
4180
Labor costs
11550
Total cost of Machine
108240
DEPRECIATION
Straight line method
Useful life
8
Salvage value
1650
Depreciation for a year
13323.75
(108240-1650)/8
Depreciation from May to December 2017
8882.5
(13323.75*8/12)
Sum of the years' digits method
Depreciated value
106590
(108240-1650)
No of years
8
(1+2+3+4+5+6+7+8)
36
Depreciation for 2018
(106590 * 8 /36 * 4/12) +
(106590 * 7/36 * 8/12)
21713
Double declining method
Straight line percentage
12.50%
(100/8)
So, percentage for double declining method
25%
(12.50 * 2)
Depreciation from May to December 2017
(106590 * 25% * 8/12)
17765
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