Question

On August 1, Daisy’s Groomers purchased new grooming equipment for $48,000 plus 8% sales tax. The equipment was advertised for $52,000. Other costs associated with the grooming equipment were: training for use of new equipment, $800; delivery cost of $225; installation cost, $1,100; and hiring of a new groomer, $1,000/month. At what amount will the grooming equipment be recorded on a balance sheet?

A. $ 53,965

B. $ 53,165

C. $ 54,085

D. $ 55,085

XYZ, Inc. purchased an office building on October 1, 2020, that was put on the books at $800,000.  The building is expected to be used for 35 years and at the end of the 35 years will be sold for an estimated selling price of $100,000.  XYZ closes its books at the end of every calendar year.  XYZ, Inc. uses the straight-line method of depreciation.  Based on this information, which of the following is correct?

A. Depreciation Expense at 12/31/20 is $20,000.

B. Accumulated Depreciation at 12/31/20 is $20,000

C. Depreciation Expense at 12/31/2021 is $5,000

D. Accumulated Depreciation at 12/31/21 is $25,000

Answer 1

Solution: 1

Calculation of Asset Price for Grooming Equipment

Particulars	Calculation	Amount
Purchase Price		48,000
Sales Tax on Purchase price	48,000 * 8%	3,840
Training of New Equipment		800
Delivery Cost		225
Installation Cost		1,100
Total Cost for Grooming Equipment		53,965

Hence, Option A $53,965 is correct answer.

Solution :2

As given in question,

Building Purchase price = $800,000

Salvage Value of Building = $100,000

Life of the Building = 35 years

Annual Depreciation = (Purchase price - Salvage Value) / Life of asset

= ($800,000 - $100,000) / 35 years

= $700,000 / 35

= $20,000

Calculation of Depreciation on 31-Dec-2020 and 31-Dec-2021

As we can see from the table above,

Option D Accumulated Depreciation at 12/31/21 is $25,000 is the correct Answer