AA purchased a van (cost: $50,000, salvage value: $5,000, useful life: 5 years). 1. Under straight-line...

AA purchased a van (cost: $50,000, salvage value: $5,000, useful life: 5 years).

1. Under straight-line method, how much is the book value at the end of 3^rd year of its useful life?

$18,000

$20,000

$23,000

$27,000

2. Under double-declining balance method, how much is the book value at the end of 5^thyear?

$2,333

$5,432

$6,221

None of the above

3. Under sum-of-years’ digits method, how much is the accumulated depreciation at the end of 3^rd year?

4. Under sum-of-years’ digits method, how much is the annual depreciation expense for 2^ndyear?

5. AA estimated the total usage of this van would be 100,000 miles. During the first year, this van was used for 30,000 miles. What is the amount of book value at the end of 1^st year?

Expert Solution

ekkarill92 answered 6 months ago

Given an asset with initial cost of $20,000, useful life of 5 years, salvage value =...

Given an asset with initial cost of $20,000, useful life of 5 years, salvage value = 0, find the depreciation allowances and the book values using the a. Straight-Line Method b. MACRS

Compute Straight Line Depreciation for the Truck: Purchased July 1, $20,000 cost, $2,000 salvage value, 5...

Compute Straight Line Depreciation for the Truck: Purchased July 1, $20,000 cost, $2,000 salvage value, 5 years useful life Depreciation Calculation: Depre. Exp. = cost – salvage value* (time in service) useful life 2018 Depreciation: $20,000-2000*(6/12) = $1,800 5 years 2019 Depreciation: 2020 Depreciation: 2021 Depreciation: 2022 Depreciation: 2023 Depreciation: The journal entry to record the Depreciation Expense for Year 1 is: Date Accounts Debit Credit 12/31/18 Depreciation Expense - Truck $1,800 Accumulated Deprec. - Truck...

Daniels company purchased a machine for $100000. Useful life 5 years(book and tax) no salvage value....

Daniels company purchased a machine for $100000. Useful life 5 years(book and tax) no salvage value. Record depreciation for 5 yaers using straight line, double declining balance, MACRS

Company ABC bought an equipment for $50,000 in 2015, with useful life of 5 years $5,000...

Company ABC bought an equipment for $50,000 in 2015, with useful life of 5 years $5,000 residual value amortized using straight-line method. a) Assume, this equipment was sold June 30th, 2016 for $40,000. Please prepare All related JEs for 2015, 2016 (tax,amortization and sale of asset)

Net cost of new equipment: 1,000,000 life: 10 years, no salvage value, straight line depreciation Forecasted...

Net cost of new equipment: 1,000,000 life: 10 years, no salvage value, straight line depreciation Forecasted sales volume: 10,000 units per year variable costs: 60 dollars per unit fixed: 30 dollars per unit 150,000 per year Taxes are 40% and cost of capital is 14% Break even sales are said to be 8,333.3. Sales are expected to be 10,000 units and project is expected to generate net income of 30,000 per year. You are told it should be accepted. Revenue...

Consider an asset with the cost basis of $500,000, useful life of 5 years and salvage...

Consider an asset with the cost basis of $500,000, useful life of 5 years and salvage value of 10,000 at the end of its useful life. This asset generates yearly revenue of $275,000 and its operating cost is $55,000 per year. Average inflation rate is estimated to be 4% over the next 5 years. Calculate tax saving in year 2 due to depreciation; if the double declining method is used for depreciation (tax rate is 30%). (Report your answer in...

A machine costs Rs. 10,000 with useful life of 5 years. It has a salvage value...

A machine costs Rs. 10,000 with useful life of 5 years. It has a salvage value of Rs. 2,000 at the end of its useful life. The machine is expected to generate the following cash flows; Year Cash Flow (PKR) 1 5,000 2 6,000 3 8,000 4 6,500 5 4,000 Calculate Accounting Rate of Return? Tax is applied at 30% per annum. Why Accounting Rate of Return is not among the favorite methodology to evaluate a project? In what circumstances...

Investment in new machinery $10,000,000 Useful life of the machinery 5 years Depreciated using straight line...

Investment in new machinery $10,000,000 Useful life of the machinery 5 years Depreciated using straight line depreciation to zero salvage value over the useful life of machinery Expected life of the project 4 years Expected incremental annual sales in the next 4 years $12,500,000 Cost of goods sold 60% of sales Fixed Operating Expenses per year $500,000 Estimated selling price at the end of 4 years $1,750,000 Working capital needs to support sales of $12,500,000 $3,000,000 Working capital will be...

Cost Salvage Value Useful Life Units of Production MACRS Class Life Asset #1 $ 1,400,000 $ ...

Cost Salvage Value Useful Life Units of Production MACRS Class Life Asset #1 $ 1,400,000 $ 100,500 5 2016 41,000 5 * Total units of 2017 48,000 output = 2018 26,000 160,000 On january 1st 2016, the company purchased the above asset. Then, calculate the annual depreciation for 2016, 2017, and 2018 assuming they were all purchased June 1st, 2016. Show all of your work.

Straight Line Depreciation - Commercial Lawn Mower: Acquired January 1. Purchased for $14,000; salvage value is...

Straight Line Depreciation - Commercial Lawn Mower: Acquired January 1. Purchased for $14,000; salvage value is $2,000. Useful life is 5 years. Remember: the asset cannot depreciate below its salvage value. A. How is the depreciable cost for the straight-line method computed? B. What is the depreciable cost amount? C. Show your coputation to calculate the annual depreciation expense. D. Complete the following Straight Line Depreciation table: Year Opening Value Depreciation Expense Net Book Value E. What pattern is clear...

Question