Question

In: Accounting

On January 5, 2018 Calvin's Cropcrushers, Inc. purchased crop crushing equipment for which the following information...

On January 5, 2018 Calvin's Cropcrushers, Inc. purchased crop
crushing equipment for which the following information is available:
Original cost.................. $3,800,000
Estimated residual value....... $200,000
Useful life in years........... 10 years
Useful life expressed in operating hours 20,000 hours
17 The accumulated depreciation at December 31, 2019 (end of
second year) units of output is used and the equipment was operated for
another 2700 hours in 2019.
18 The book value of the equip. on December 31, 2019 if units of output is used.
(Equipment operated 2900 hrs in 2018, 2700 hrs in 2019)
19 The depreciation for year 2020 assuming the equipment is sold
on September 30, 2020 and is operated for 2,300 hours in 2020.
(assuming the units of output method is used)
20 The book value of the equipment assuming the facts in #19

Solutions

Expert Solution

Answer:

Units of Output method

Depreciation under Units of Output method

= [(Cost of the asset - Salvage Value) / Total hours can be used] * Actual hours used during the year

17. Accumulated Depreciation at December 31,2019

Accumulated Depreciation at December 31,2019

= Depreciation for 2018 + Depreciation for 2019

Depreciation for 2018 = [($3,800,000 - $200,000) / 20,000] * 2,900 = ($3,600,000 / 20,000) * 2,900 = $522,000

Depreciation for 2019 = [($3,800,000 - $200,000) / 20,000] * 2,700 = ($3,600,000 / 20,000) * 2,700 = $486,000

Accumulated Depreciation at December 31,2019

= $522,000 + $486,000

= $1,008,000

18. Book value of equipment on December 31,2019

Book value of equipment on December 31,2019

= Cost of the asset - Accumulated Depreciation on December 31,2019

= $3,800,000 - $1,008,000

= $2,792,000

19. Depreciation for year 2020

The equipment is operated for 2,300 hours. The equipment is sold on September 30,2020.

Depreciation for 2020 = [($3,800,000 - $200,000) / 20,000] * 2,300 = ($3,600,000 / 20,000) * 2,300 = $414,000

20. Book Value as on September 30,2020

Book value of equipment on September 30,2020

= Book value of equipment on December 31,2019 - Depreciation for 2020

= $2,792,000 - $414,000

= $2,378,000


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