Question

In: Accounting

Equipment Cost $134,000 Installation Labor $4,500 Freight $10,000 Repairs of Damage during installation $6,000 Insurance on...

Equipment Cost	$134,000
Installation Labor	$4,500
Freight	$10,000
Repairs of Damage during installation	$6,000
Insurance on Freight	$1,500
Estimated Salvage Value	$20,000
Useful LIfe	8 years

Each question is independent from the others. Answer using the information above.

1. What is the book value after 3 years of depreciation, using straight line?

2.What is the accumulated depreciation after 3 years, using double declining balance?

3. What is the depreciable value of the asset?

4. Assuming straight line depreciation, at the end of year 4, an improvement is made that costs 9,000 and adds 1 year of life to the equipment. Salvage value is not changed.Compute the year 5 depreciation expense.

Expert Solution

Equipment Cost	$134,000
Installation Labor	$4,500
Freight	$10,000
Repairs of Damage during installation	$6,000
Insurance on Freight	$1,500
Price of an equipment	$ 156,000

1. What is the book value after 3 years of depreciation, using straight line?

Purchase Price of an equipment = $ 156,000

Salvage Value = $ 20,000

Useful Life = 8 years

Annual Depreciation unders Straight Line Method =( $156,000 - 20,000) /8

= $ 17,000

Book Value after 3 years is:

Purchase Price = $156,000

Less: Depreciation for three years (17,000 * 3) = 51,000

Book value after 3 years = $105,000

2.What is the accumulated depreciation after 3 years, using double declining balance?

Cost of equipment = $ 156,000

Useful life = 8 years

Salvage Value = $20,000

Depreciation Rate = (1/ Useful Life ) *100 = (1/8) *100 = 12.5%

Double Declining Balance = 2* Depreciation Rate = 25%

Year	Balance ( brgining)	Depreciation	Book Value (at the end)
1	$156,000	25% = 39,000	$117,000
2	$117,000	25% = 29,250	87,750
3	$ 87,750	25% = 21937.5	65,812.5

Book Value under Double Declining Method after 3 years is = $ 65,812.5

3. What is the depreciable value of the asset?

Depreciable Value, in relation to tangible assets, is the value difference between cosrt of an asset and salvage Value. It is computed as follows:

Depreciable Value = Cosrt of Asset - Salvage Value

= $156,000 - 20,000

= $136,000

4. Assuming straight line depreciation, at the end of year 4, an improvement is made that costs 9,000 and adds 1 year of life to the equipment. Salvage value is not changed.Compute the year 5 depreciation expense.

At the end of 4 years book value ( as per straight line method) would be:

Cost of Asset = $ 156,000

Less: Depreciation of 4 years (17,000 * 4 ) = 68,000

Value after 4 years = 88,000

Add: Improvement Cost = 9,000

New Total Value = $ 97,000

Salvage Value = $ 20,000

New Useful Life = 5 years

Yearly Depreciation Expense would be = ( 97,000 - 20,000) / 5 = $15,400

5 Years Depreciation would be = $ 15,400 * 5 = $ 77,000

ekkarill92 answered 2 years ago

sam paid for the truck refit. Parts and installation cost $4000, freight costs $3000, & insurance...

sam paid for the truck refit. Parts and installation cost $4000, freight costs $3000, & insurance on freight another $1,800. (All prices include GST). Pass the journal entry. there are only few accounts from which we to select they are;- Cost of Goods Sold, Inventory, Office supplies, Office supplies expenses, utilities payable, utilities expenses, cash.

Equipment purchased January 2, for $10,000 including sales tax of$700, installation cost of$1000 and start-up testing...

Equipment purchased January 2, for $10,000 including sales tax of$700, installation cost of$1000 and start-up testing of$500. Useful life 5 years or 5,000 machine hours, residual value $500, usage year 1, 1,800 hours, year2, 1,400 hours. Using the double declining method, the net book value be at the end of year 2 would be: A $4,032 B $4,472 C $4,212 D $4,392

The equipment cost (equipment plus shipping and installation) can be depreciated at the rate of 21%...

The equipment cost (equipment plus shipping and installation) can be depreciated at the rate of 21% in the first year. For the remaining 5 years (years 2-6) the depreciation will be equal to $30,000 per year. What is the amount of depreciation in year 1?

ERS Inc. maintains and repairs office equipment. ERS had an average of 10,000 shares of common...

ERS Inc. maintains and repairs office equipment. ERS had an average of 10,000 shares of common stock outstanding for the year. The following income statement account balances are available for ERS at the end of 2019. Advertising expense $24,100 Depreciation expense (on service van) 16,200 Income taxes expense 15,150 Interest expense 10,100 Rent expense 58,400 Insurance expense 11,900 Salaries expense (for administrative personnel) 195,600 Service revenue 933,900 Supplies expense 66,400 Utilities expense 26,100 Wages expense (for service technicians) 448,300 Required:...

Farmer Company sold a piece of equipment for $6,000. The equipment had an original cost of...

Farmer Company sold a piece of equipment for $6,000. The equipment had an original cost of $34,000 and accumulated depreciation of $31,000 at the time of the sale. Which of the following correctly shows the effect of the sale on the elements of the financial statements? Assets = Liab. + Stk Equity Rev./Gain − Exp. = Net Inc. Stmt of Cash Flow A. 3,000 NA 3,000 3,000 NA 3,000 6,000 OA B. (3,000) NA (3,000) NA 3,000 (3,000) 6,000 IA...

• The required equipment would cost $160,000, plus an additional $35,000 for shipping and installation. •...

• The required equipment would cost $160,000, plus an additional $35,000 for shipping and installation. • In addition, inventories would rise by $26,000, while accounts payable would go up by $6,000. All of these costs would be incurred at Year 0. (In other words, increase net working capital is $25,000) • By a special ruling, the machinery could be depreciated under the MACRS system as 3-year property. Year 1 : 33%, Year 2: 45%, Year 3: 15%, Year 4: 7%...

(Unleveraged returns) You plan to invest $10,000 in a security, borrowing $6,000 of the cost from...

(Unleveraged returns) You plan to invest $10,000 in a security, borrowing $6,000 of the cost from a friend, thus putting up $4,000 of your own money. The cost of debt is 12%, and there are no taxes. With this arrangement, you expect a return of 20% on your equity investment. What would your return be without the leverage? That is, what would your return be if the entire $10,000 was your own money?

An insurance company offers two policies that cover the cost of repairs from driving accidents. A...

An insurance company offers two policies that cover the cost of repairs from driving accidents. A policy costing $600 annually has an $800 deductible (meaning the driver is responsible for paying the first $800 in damages before the insurance kicks in), whereas a policy that costs $2 comma 500 annually has a $350 deductible. Assume that accidents that get reported to the insurance company require more than $800 to repair the car. If the number of accidents are modeled as...

The Strokes LLC. purchases equipment for 100,000 on 1/1/2016. Installation costs and testing costs were 10,000...

The Strokes LLC. purchases equipment for 100,000 on 1/1/2016. Installation costs and testing costs were 10,000 and 5,000 respectively. Using the following information, answer the next two questions. Estimated residual value is = $25,000 Useful life is = 8 years If the Strokes use sum of years digits method for recording depreciation, what is the accumulated depreciation at the end of 2017 ? Assume December 31st year-end.

Your company buys a piece of equipment for a cost of 225k including tires. Freight costs...

Your company buys a piece of equipment for a cost of 225k including tires. Freight costs are 4k. Tire replacement costs 25k and lasts 4000 hours. The equipment has a total life of 10000 hours and the plan is to use it 1000 hrs per year. Fuel costs 2.35 per gallon and equipment usage is 5gal/hr. The equipment will be used for 5 years and sold for 100k. Company overhead and interest is 20%. Determine he total ownership and operating...