Exercises.8-10 Tory Enterprises pays $238,400 for equipment that will last five

Question

Exercises.8-10 Tory Enterprises pays $238,400 for equipment that will last five years and have a $43,600 salvage value. By using the equipment in its operations for five years, the company expects to earn $88,500 annually, after deducting all expenses except depreciation. Prepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five-year period, assuming double-declining-balance depreciation is used. Exercise 8-15 Martinez Company owns a building that appears on its prior year-end balance sheet at its original $572,000 cost less $429,000 accumulated depreciation. The building is depreciated on a straight-line basis assuming a 20-year life and no salvage value. During the first week in January of the current calendar year, major structural repairs are completed on the building at a $68,350 cost. The repairs extend its useful life for 5 years beyond the 20 years originally estimated. 1. Determine the building's age (plant asset age) as of the prior year-end balance sheet date. 2. Prepare the entry to record the cost of the structural repairs that are paid in cash. 3. Determine the book value of the building immediately after the repairs are recorded. 4. Prepare the entry to record the current calendar year's depreciation.

Explanation / Answer

Table : 8-10

Income before dep Depreciation exp Net income (Pretax) 1 88500 238400*40%=95360 (6860) 2 88500 238400*60%*40%=57216 31284 3 88500 238400*60%*60%*40%=34330 54170 4 88500 7894 80606 5 88500 88500 Total 442500 194800 247700

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