Question

In: Accounting

On January 1, 2019, Happy Company purchased equipment for $114,000. The equipment was assigned a useful...

On January 1, 2023, Happy Company revised the life of the equipment from 15 to 20 years.

On January 1, 2026, Happy Company revised the life of the equipment from 20 to 12 years.

On January 1, 2028, Happy Company spent $58,000 to overhaul the equipment. This capital expenditure resulted in Happy Company changing the life of the equipment from 12 years to 25 years and adjusting the residual value to be $5,650 at the end of the 25 years.

Calculate the book value of the equipment at December 31, 2030.

Solutions

Expert Solution

Depreciation under straight line method = Cost - Salvage value / Useful life

Depreciation = ($114000 - $6000) / 15

= $108000 / 15 = $7200

From January 1, 2019, $7200 will be charged every year (till the date of revision) as deprecation.

On January 1, 2023 (i.e. after 4 years), useful life of the equipment has been revised from 15 to 20 years.

Accumulated depreciation till January 1, 2023 (after 4 years) = 4* $7200 = $28800

Book value on January 1, 2023 = Cost - Accumulated Depreciation

= $114000 - $28800

= $85200

Remaining useful life of the equipment on January1, 2023 is 16 years (i.e. 20 - 4) years

Revised depreciation from January 1, 2023 = Book value on January 1, 2023 - Salvage value on January 1, 2023 / Useful life

Salvage value on January 1, 2023 = 0

Revised Depreciation = $85200 / 16 = $5325

From January 1, 2023, $5325 will be charged every year (till the date of revision)) as deprecation.

On January 1, 2026 (i.e. after 7 years from purchase), useful life of the equipment has been further revised from 20 to 12 years.

Accumulated depreciation till January 1, 2026 (after 7 years from purchase) = $28800 + (3* $5325) = $28800 + $15975 = $44775

Book value on January 1, 2026 = Cost - Accumulated Depreciation

= $114000 - $44775

= $69225

Remaining useful life of the equipment on January1, 2026 is 5 years (i.e. 12 - 4 - 3) years

Revised depreciation from January 1, 2026 = Book value on January 1, 2026 - Salvage value on January 1, 2026 / Useful life

Salvage value on January 1, 2026 = 0

Revised Depreciation = $69225 / 5 = $13845.

From January 1, 2026, $13845 will be charged every year (till the date of revision)) as deprecation.

On January 1, 2028 (i.e. after 9 years of purchase), useful life of the equipment has been further revised from 12 to 25 years.

Accumulated depreciation till January 1, 2028 (after 9 years of purchase) = $28800 + (3* $5325) + (2*$13845)= $28800 + $15975 + $27690

= $72465

Book value on January 1, 2028 = Cost + Capital expenditure - Accumulated Depreciation

= $114000 + $58000 - $72465

= $99535

Remaining useful life of the equipment on January1, 2028 is 16 years (i.e. 25 - 4 - 3 -2) years

Revised depreciation from January 1, 2028 = Book value on January 1, 2028 - Salvage value on January 1, 2028 / Useful life

Salvage value on January 1, 2028 = $5650

Revised Depreciation = ($99535 - $5650) / 16 = $5868.

From January 1, 2028, $5868 will be charged every year (till the date of revision)) as deprecation.

On December 31, 2030, Accumulated Depreciation = $72465 + (3 * $5868) = $72645 + $17604 = $90249

Book value on December 31, 2030 is:

Cost - Accumulated Depreciation

= $114000 - $90249 = $23751

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

On January 1, 2019, Happy Company purchased equipment for $114,000. The equipment was assigned a useful...

On January 1, 2019, Happy Company purchased equipment for $114,000. The equipment was assigned a useful life of 15 years and a $6,000 residual value. Happy Company will use the straight-line method to depreciate the equipment. On January 1, 2023, Happy Company revised the life of the equipment from 15 to 20 years. On January 1, 2026, Happy Company revised the life of the equipment from 20 to 12 years. On January 1, 2028, Happy Company spent $58,000 to overhaul...

Company purchased equipment costing $239,000 on January 1, 2022. The equipment was assigned an estimated useful...

Company purchased equipment costing $239,000 on January 1, 2022. The equipment was assigned an estimated useful life of six years and an estimated salvage value of $8,000. The equipment was to be depreciated using the sum-of-the-years-digits' depreciation method. On January 1, 2025, Company revised the life of the equipment from six to thirteen years. Calculate the amount of depreciation expense recorded on the equipment for 2025.

1. On January 1, 2019, ABC Company purchased a new piece of equipment. The equipment was...

1. On January 1, 2019, ABC Company purchased a new piece of equipment. The equipment was assigned a $7,000 residual value and is expected to produce a total of 60,000 units over its life. The depreciation expense reported on the equipment for 2019 was $10,734. During 2020, the equipment was used to produce 9,000 units. At December 31, 2020, the book value of the equipment was $57,466. ABC Company is using the units-of-production depreciation method to depreciate the equipment. Calculate...

Sheridan Technology purchased equipment on January 4, 2019, for $251,510. The equipment had an estimated useful...

Sheridan Technology purchased equipment on January 4, 2019, for $251,510. The equipment had an estimated useful life of 6 years and a residual value of $9,710. The company has a December 31 year end and uses straight-line depreciation. On December 31, 2021, the company tests for impairment and determines that the equipment's recoverable amount is $87,360. Calculate the equipment's carrying amount at December 31, 2021 (after recording the annual depreciation). Carrying amount Dec. 31, 2021 $enter the equipment's carrying amount...

ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of...

ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of 5 years and an estimated residual value of $5,000. Assume the equipment was sold on April 30th 2017 for $25,000 Prepare journal entries for the following: A) Calculate depreciation expense for 2015 and 2016 using straight line method of depreciation. Prepare the journal entry to record depreciation B) Calculate depreciation for 2017 and record the journal entry C) Prepare the journal entry for the...

On January 1, 2014, Pronghorn Company purchased a building and equipment that have the following useful...

On January 1, 2014, Pronghorn Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $46,800 salvage value, $762,400 cost Equipment, 12-year estimated useful life, $10,000 salvage value, $101,800 cost The building has been depreciated under the double-declining-balance method through 2017. In 2018, the company decided to switch to the straight-line method of depreciation. Pronghorn also decided to change the total useful life of the equipment to 9 years,...

Fellingham Corporation purchased equipment on January 1, 2019, for $236,000. The company estimated the equipment would...

Fellingham Corporation purchased equipment on January 1, 2019, for $236,000. The company estimated the equipment would have a useful life of 10 years with a $19,200 residual value. Fellingham uses the straight-line depreciation method. Early in 2021, Fellingham reassessed the equipment's condition and determined that its total useful life would be only six years in total and that it would have no salvage value. How much would Fellingham report as depreciation on this equipment for 2021? Multiple Choice $32,107. $65,160....

3) On January 1, 2019, the Peninsula Paper Company purchased manufacturing equipment for $600,000. The equipment...

3) On January 1, 2019, the Peninsula Paper Company purchased manufacturing equipment for $600,000. The equipment has a 5-year estimated useful life and a salvage value of $50,000. Part 1: Calculate the following: straight-line method 2019---Depreciation expense b. Accumulated Depreciation as of 12/31/20 c. Book value as of 6/30/20 d.. If the company sold the equipment on July 1, 2020 for $ 350,000 what would the gain or loss be if the company had used the straight-line depreciation method? Specify the amount and whether...

On January 1, 2020, Betty DeRose, Inc. purchased equipment for $95,000. The equipment was assigned an...

On January 1, 2020, Betty DeRose, Inc. purchased equipment for $95,000. The equipment was assigned an estimated useful life of 15 years and a salvage value of $15,200. On January 1, 2024, Betty DeRose decided the life of the equipment should be changed from 15 to 25 years with a salvage value of $8,200 at the end of the 25 years. Betty DeRose uses the straight-line depreciation method to calculate depreciation on its assets. Calculate the book value of the...

On January 1, 2018, Betty DeRose, Inc. purchased equipment for $95,000. The equipment was assigned an...

On January 1, 2018, Betty DeRose, Inc. purchased equipment for $95,000. The equipment was assigned an estimated life of 15 years and a salvage value of $12,500. On January 1, 2021, Betty DeRose decided the life of the equipment should be changed from 15 to 25 years with a salvage value of $5,900 at the end of the 25 years. Betty DeRose uses the straight-line method to depreciate its assets. Calculate the book value of the equipment at December 31,...

Subjects