A4 Case 7-1: Use the information below to answer Questions 1-4.A business purchased a machine that had a total cost of $550,000 and a residual value of$35,000. The asset is expected to service the business for a period of 10 years or produce a totalof 1,980,000 units. The machine was purchased January 1st of the current year and has been inservice one complete year.1.2.3.4.Refer to Case 7-1. What is the depreciable cost of the asset?A. $ 35,000B. $550,000C. $515,000D. $ 55,000Refer to Case 7-1. Using the straight-line method, what is the amount of depreciationexpense in year two of the asset's life?A. $ 51,500B. $103,000C. $ 55,000D. $110,000Refer to Case 7-1. Now assume the business uses the units-of-production method. If theasset produces 500,000 units in year one and 400,000 units in year two, what is bookvalue at the end of year two? (Round your calculation of depreciation per unit to theclosest cent.)A. $234,000B. $316,000C. $298,000D. $252,000Refer to Case 7-1. What is the depreciation expense in year one, if the double-declining-balance method is used?A. $ 55,000B. $110,000C. $103,000D. $ 51,5007-1

The double declining balance method (DDB) is a deprecation method that depreciates an asset at twice…

Business

Accounting

A4

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

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