1) Change of estimate: Assume that on January 1, 2020, Smeets Printing revised its estimate of the total useful life to nine years and changed its estimate of the residual value to €150,000. Assume that Smeets Printing uses straight-line depreciation. What effect would this have on the depreciation expense in 2020? 2) Gain or loss on asset sale: Assume that on December 31, 2021, Smeets Printing sells the machine to another company for €1,100,000. At the disposal date, calculate the cumulative depreciation expense and the net book value of the machine for each of the depreciation methods. Prepare the necessary journal entries to record the sale under the different depreciation methods.
1) Change of estimate: Assume that on January 1, 2020, Smeets Printing revised its estimate of the total useful life to nine years and changed its estimate of the residual value to €150,000. Assume that Smeets Printing uses straight-line depreciation. What effect would this have on the depreciation expense in 2020? 2) Gain or loss on asset sale: Assume that on December 31, 2021, Smeets Printing sells the machine to another company for €1,100,000. At the disposal date, calculate the cumulative depreciation expense and the net book value of the machine for each of the depreciation methods. Prepare the necessary journal entries to record the sale under the different depreciation methods.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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during the following years, the following scenarios take place (assume that the scenarios are independent of each other) and the controller of Smeets Printing records these:
1) Change of estimate: Assume that on January 1, 2020, Smeets Printing revised its estimate of the total useful life to nine years and changed its estimate of the residual
value to €150,000. Assume that Smeets Printing uses straight-line depreciation . What effect would this have on the depreciation expense in 2020?
2) Gain or loss on asset sale: Assume that on December 31, 2021, Smeets Printing sells the machine to another company for €1,100,000. At the disposal date, calculate the cumulative depreciation expense and the net book value of the machine for each of the depreciation methods. Prepare the necessary journal entries to record the sale under the different depreciation methods.
Transcribed Image Text:臺 花
comparable Ford Focus Electric automobile? Why or why not?
3. The story also refers to "residual value." What is residual value? Does this "residual value"
referred to by USA Today have the same meaning as the "residual value" used in accounting?
Task 19
Plant Assets
For a moment we forget about our friends at Bookmarker and go one step back in the value
chain to look at the book printer 'Smeets Printing'. On January 1, 2018, Smeets Printing has
bought a machine that improved both the speed of printing as well as the quality of the printed
books. The price of the machine was €2,000,000 with an estimated useful life of 10 years and
an estimated residual value of €100,000. In addition to the purchase price, Smeets Printing
spent €20,000 for shipping and installation and €25,000 to calibrate the machine prior to use.
The company expects that 80,000 books will be printed in each of the first 5 years with this
machine and 60,000 books in each of the last 5 years.
The controller of Smeets Printing:
(1)
2) Has to decide which depreciation method the company will use for this machine. He
1) Prepares the journal entries to record the acquisition costs.
works out the different scenarios (straight-line, Declining-balance, and units-of-
activity) and makes the calculations.
3) In your opinion, which depreciation method should the company use?
During the following years, the following seenarios take place (assume that the scenarios are
independent of each other) and the controller of Smeets Printing records these:
1) Change of estimate: Assume that on January 1, 2020, Smeets Printing revised its
estimate of the total useful life to nine years and changed its estimate of the residual
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