Professor P.Dass Questions 1 through 4 In recent years, Lone Star Company purcha
ID: 2600431 • Letter: P
Question
Professor P.Dass Questions 1 through 4 In recent years, Lone Star Company purchased three assets. Information concerning the assets is summarized below. Salvage Useful Asset Acquired Cost Value In Years Method 5 Straight-line Truck 1/1/2007 Car Excavator 1/1/2007 S 10,000 1/1/2008 S 12,000 4 Declining-balance 6 Units-of-activity Question 1(10 points). Prepare a depreciation schedule for truck using the straight- S160,000 S 15,000 line method for the first three years. Question 2(10 points). Prepare a depreciation sehedule for the car using the double- declining balance method for the first three years. Question 3 (10points). Calculate the depreciation expense for the excavator using the units of activity method for year 2007 and 2008. Total machine hours are expected to be 45,000. Actual hours of use in the first three years were: 2007, 15,000 hours; 2008, 12,000 hours; 2009, 10,500 hours. estion 4 (4 points). What is the journal entry for depreciation expense for the car for 2009. You must include the dollar amount. Hint: make the journal entry Qu DrExplanation / Answer
1.
Straight Line Method
Depreciation per year = (Cost – Salvage value) / Useful years
= (75,000 – 10,000) / 5 Years
= $13,000 per year
Year
Depreciation
2007
$13,000
2008
$13,000
2009
$13,000
2.
Double Declining Balance
In double declining method the rate of Depreciation will be:
= 2 * Straight Line Rate
= 2 * 25% (Life is 4 years so 25% each year)
= 50%
Depreciation = Book Value * Rate
Year
Depreciation
Book Value
(Beginning balance)
2007
46,000 (92,000*50%)
92,000
2008
23,000
(46,000*50%)
46,000
2009
11,500
(23,000*50%)
23,000
3.
Units of Production Method
Total Machine Hours = 45,000 hrs.
Depreciation = (Actual hours of that year / Total Hours) * (Cost – Salvage Value)
2007 = (15,000/45,000) Hours * (160,000 - 15,000)
2007 = $48,333
2008 = (12,000/45,000) Hours * (160,000 - 15,000)
2008 = $38,667
4.
Dr. $
Cr. $
Depreciation expense
11,500
Car
11,500
Year
Depreciation
2007
$13,000
2008
$13,000
2009
$13,000
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