Question
In: Accounting
40. What was the balance in Accumulated Depreciation on December 31, 20x2 if Max company used the S/L method?
|
On July 1, 20x1, Max company acquired equipment for $1,500,000. Its estimated life was 5 years or 40,000 hours. The residual value was estimated as $100,000. |
40. What was the balance in Accumulated Depreciation on December 31, 20x2 if Max company used the S/L method?
A. $140,000
B. $280,000
C. $420,000
D. $560,000
|
Your answer (A, B, C, or D) |
Show your calculation in detail.
41. What was the balance in Accumulated Depreciation on December 31, 20x2 if Max company used the DDB method?
A. $300,000
B. $600,000
C. $780,000
D. None of the above
|
Your answer (A, B, C, or D) |
Show your calculation in detail.
Solutions
Expert Solution
Answer:
40.
Option (B) $280,000
Based on the information available in the question, we can summarize as follows:-
Cost of the equipment - $1,500,000
Estimated Life - 5 years.
Residual Value - $100,000
Depreciation per year under straight line depreciation method :- (
=Cost of the equipment - Salvage/Residule value)/Estimated life of the asset
=($1,500,000 - $100,000)/5 years
=($1,400,000)/5 years
Straight Line Depreciation = $280,000 per year
Depreciation for 2021 (July 01 - December 30) = $280,000 * 6/12 = $140,000 A
Depreciation for 2022 = $280,000 B
A + B = $320,000
Accumulated Depreciation as of 12/31/2022 = $320,000
41.
Option (C) $780,000
Working:
Straight-lime method (SLM) depreciation rate = 1 / 5 = 0.20
So, Double Declining Balance (DDB) depreciation rate = 0.2 x 2 = 0.40 or 40%
(a) DDB depreciation schedule
|
Year |
Cost ($) |
Annual Depreciation ($) |
Accumulated Depreciation ($) |
Balance ($) |
|
2021 |
1,500,000 |
300,000 (1,500,000*40%*6/12) |
300,000 |
1,200,000 |
|
2022 |
1,200,000 |
480,000 (1,200,000*40%) |
780,000 (300,000+480,000) |
720,000 |
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