On June 1, 2014, Montreal Corporation purchased a machine to process steel. The machine that cost...

On June 1, 2014, Montreal Corporation purchased a machine to process steel. The machine that cost $3,000,000 was purchased from Ontario Machine Inc. located in Toronto. Shipping amounted to $200,000, annual insurance on the machine was $25,000 while the installation cost was $85,000. Managers have estimated a 7 yearuseful life and a $200,000 salvage value (residual value). MontrealCorporation’s year-end is December 31st.

Required:

(a) The president of Montreal Corporation wants you to calculate amortization expense for the years ended December 31, 2014and December 31, 2015assuming the company chooses i) the straight-line method and ii) the double-declining balance method of amortization. Please show all your work.

(b) Assume that Montreal Corporation has chosen the straight-line method to amortize the asset. On January 1, 2016, management changed its initial estimate of the useful life of the asset. Based on further research, their engineering department now believes the total useful life of the asset is more likely to be 8 years. And the salvage value becomes $150,000. Based on this information, calculate the amortization expense for the year ended December 31, 2016.

Expert Solution

ekkarill92 answered 3 months ago

The cost of equipment purchased by Charleston, Inc., on June 1, 2014, is $201,140. It is...

The cost of equipment purchased by Charleston, Inc., on June 1, 2014, is $201,140. It is estimated that the machine will have a $11,300 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 94,920, and its total production is estimated at 1,186,500 units. During 2014, the machine was operated 13,560 hours and produced 124,300 units. During 2015, the machine was operated 12,430 hours and produced...

On November 1, 2014, the Yankee Corporation, a U.S. corporation, purchased and received an extruding machine...

On November 1, 2014, the Yankee Corporation, a U.S. corporation, purchased and received an extruding machine from Wales Corporation, a UK company. The purchase price was $10,000 (U.S. dollars) and Yankee agreed to pay in pounds on February 1, 2015. Both corporations are on a calendar year accounting period. Assume that the spot rates for the British pound on November 1, 2014, December 31, 2014, and February 1, 2015, are $1.60, $1.62, and $1.66, respectively. Required: Record the November 1,...

KC Corporation purchased a new machine for its assembly process on August 1, 2010. The cost...

KC Corporation purchased a new machine for its assembly process on August 1, 2010. The cost of this machine was $150,000. The company estimated that the machine would have a salvage value of $24,000 at the end of its service life. Its life is estimated at 5 years and its working hours are estimated at 21,000 hours. Year-end is December 31. Instructions: Compute the depreciation expense under the following methods. (a) Straight-line depreciation. (b) Double-declining balance c) Search from the...

Blue Corporation purchased a new machine for its assembly process on August 1, 2020. The cost...

Blue Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $169,800. The company estimated that the machine would have a salvage value of $16,800 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 20,000 hours. Year-end is December 31. Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate...

Marigold Corporation purchased a new machine for its assembly process on August 1, 2020. The cost...

Marigold Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $127,500. The company estimated that the machine would have a salvage value of $10,500 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 20,000 hours. Year-end is December 31. Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate...

Bramble Corporation purchased a new machine for its assembly process on August 1, 2020. The cost...

Bramble Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $150,900. The company estimated that the machine would have a salvage value of $15,900 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 22,500 hours. Year-end is December 31. Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate...

Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $150,000. The...

Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $150,000. The residual value of the lathe was estimated to be $15,000 at the end of a five-year life. The lathe was sold on March 31, 2018, for $45,000. Howarth uses the straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service. Required: 1. Prepare a schedule to calculate the gain...

Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $115,000. The...

Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $115,000. The residual value of the lathe was estimated to be $10,000 at the end of a five-year life. The lathe was sold on March 31, 2018, for $34,000. Howarth uses the straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service. Required: 1. Prepare a schedule to calculate the gain...

Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $80,000. The...

Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $80,000. The residual value of the lathe was estimated to be $5,000 at the end of a five-year life. The lathe was sold on March 31, 2018, for $17,000. Howarth uses the straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service. 1.Prepare a schedule to calculate the gain or loss...

Phillips Machinery Corporation purchased machinery for cash of $60,000 on January 1, 2014. The machine has...

Phillips Machinery Corporation purchased machinery for cash of $60,000 on January 1, 2014. The machine has an estimated useful life of 5 years and will be depreciated using the straight-line method with no salvage value. The machine was then leased to Roadway Company an 80% owned subsidiary under a 5-year operating lease for $15,000 per year, payable January 1, every year. Required 1. Record the 2014 entries for the purchase of the machine and the lease to Roadway Company on...

Question