On January 1, 2019, Pete Company purchases manufacturing equipment for $120,000. Installation and delivery costs totaled...

On January 1, 2019, Pete Company purchases manufacturing equipment for $120,000. Installation and delivery costs totaled $8,000. Yearly maintenance costs on the equipment are expected to be $6,000. The expected useful life is 8 years with a salvage value of $12,000.

- What amount should Pete Company have in its equipment account after the purchase?

- What amount of depreciation expense would Pete Company record in 2019?

- What amount of accumulated depreciation expense would Pete Company report on its December 31, 2021 balance sheet?

- What is the book value of the equipment on December 31, 2023?

- What amount of gain or loss would Pete Company record if it sold the equipment for $36,000 on January 1, 2025?

Thanks in advance

Expert Solution

What amount should Pete Company have in its equipment account after the purchase?
Equipment Value = Original Cost + Installation and delivery costs
= $120,000 + $8,000 = $128,000

What amount of depreciation expense would Pete Company record in 2019?
Depreciation Expense = (Original Cost - Salvage Value) / Useful Life
= ($128,000 - $12000) / 8 = $14500 per year

What amount of accumulated depreciation expense would Pete Company report on its December 31, 2021 balance sheet?
Accumulated depreciation on December 31, 2021 = $14500 x 3 = $43500

What is the book value of the equipment on December 31, 2023?
Accumulated depreciation on December 31, 2023 = $14500 x 5 = $72500
Book Value of Equipment = Original Cost - Accumulated Depreciation
= $128000 - $72500 = $55500

What amount of gain or loss would Pete Company record if it sold the equipment for $36,000 on January 1, 2025?Accumulated depreciation on December 31, 2024 = $14500 x 6 = $87000
Book Value of Equipment = Original Cost - Accumulated Depreciation
= $128000 - $87000 = $41000
Since sale value is less than book value, there is loss on sale
i.e. $41000 - $36000 = $5000

ekkarill92 answered 2 years ago

56. Yamato Company's 2019 fixed manufacturing overhead costs totaled Php120,000 and variable selling costs totaled...

56. Yamato Company's 2019 fixed manufacturing overhead costs totaled Php120,000 and variable selling costs totaled P45,000. Under absorption costing, how much of the costs are period costs? Group of answer choices None Php120,000 Php165,000 Php45,000 62. C2 Company had sales of Php576,000 and variable costs of Php324,000. Fixed costs amount to Php96,000 from an expected production of 7,200 units. If the company expects to increase its sales by 960 units by incurring an additional Php24,000 for advertising expense, what...

combos Company purchases a delivery truck for $12,000 on January 1, 2019. combos expects to use...

combos Company purchases a delivery truck for $12,000 on January 1, 2019. combos expects to use the truck only two years and to sell it for $4,000. The company’s policy is to use straight-line depreciation but depreciation in 2019 is not recorded. Rather, the accountant charges the entire cost to delivery expense in 2019. The controller discovers the error late in 2020. REQUIRED: Provide the 2020 entries to record depreciation and the error correction and indicate the amounts of the...

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.

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...

Ivan Manufacturing purchased equipment and a delivery van on January 1, 2020. The equipment cost $95,000...

Ivan Manufacturing purchased equipment and a delivery van on January 1, 2020. The equipment cost $95,000 and has an estimated useful life of 8 years with a residual value of $10,000. The delivery van cost $125,000 and has an estimated life of 5 years or 200,000 kilometres and a residual value of $20,000. The delivery truck is expected to be driven 25,000 and 50,000 kilometres in 2019 and 2020, respectively. Required Ivan has decided to depreciate the equipment using either...

Company purchases a new punch press at a cost of $265,000. Delivery and installation cost $46,000....

Company purchases a new punch press at a cost of $265,000. Delivery and installation cost $46,000. The machine has a useful life of 12-years, but will depreciate using MACRS over a seven year property class, 1. What is the cost basis of the machine 2. What will be the depreciation allowance each year over the seven years 3. If we sell the machine at the end of five years for $70,000, what will be the gain/loss tax assuming a 40%...

Question (2) ABC Company purchased equipment at a cost of $120,000 on January 1, 2018 that...

Question (2) ABC Company purchased equipment at a cost of $120,000 on January 1, 2018 that it expects to be useful for four years, and to have a residual value of $8,000. The Company uses the Double-declining balance method for depreciation. Required: Compute the Depreciation expense for each of 2018 and 2019.

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...

On January 1, 2019, ABC Company borrowed $120,000 from the bank. The loanis a 7-year...

On January 1, 2019, ABC Company borrowed $120,000 from the bank. The loan is a 7-year note payable that requires annual payments of $24,500 every December 31, beginning December 31, 2019. Assume the loan has an interest rate of 10% compounded annually. Calculate the amount of the note payable at December 31, 2020 that wouldbe classified as a current liability.

Keystone Manufacturing Company started operations on January 1, 2019. During 2019, the company engaged in the...

Keystone Manufacturing Company started operations on January 1, 2019. During 2019, the company engaged in the following transactions: Issued common stock for $40,000. Paid $10,000 cash to purchase raw materials used to make products. Transferred $9,000 of raw materials to the production department. Paid $12,000 cash for labor used to make products. Paid $18,000 cash for overhead costs (assume actual and estimated overhead are the same). Finished work on products that cost $35,000 to make. Sold products that cost $31,500...

Question