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Assume that Sample Company purchased factory equipment on January 1, 2017, for $90,000. The equipment has an estimated life of five years and an estimated residual value of $9,000. Sample's accountant is considering whether to use the straight-line or the units-of-production method to depreciate the asset. Because the company is beginning a new production process, the equipment will be used to produce 10.000 units in 2017, but production subsequent to 2017 will increase by 10,000 units each year. Required: 1. Calculate the depreciation expense, accumulated depreciation, and book value of the equipment under both methods for each of the five years of its life. Enter all amounts as positive values. Straight-line method: Annual Accumulated Book Year Depreciation Depreciation Value 2017 S 2018 2019 2020 2021 Units-of-production method: Annual Accumulated Book Year Depreciation. Depreciation Value 2017 $ 2018 2019 2020 2021 2. In this exercise. The units of production method results in a depreciation pattern opposite to which depreciation method?

Assume that Sample Company purchased factory equipment on January 1, 2017, for $90,000. The equipment has an estimated life of five years and an estimated residual value of $9,000. Sample's accountant is considering whether to use the straight-line or the units-of-production method to depreciate the asset. Because the company is beginning a new production process, the equipment will be used to produce 10.000 units in 2017, but production subsequent to 2017 will increase by 10,000 units each year. Required: 1. Calculate the depreciation expense, accumulated depreciation, and book value of the equipment under both methods for each of the five years of its life. Enter all amounts as positive values. Straight-line method: Annual Accumulated Book Year Depreciation Depreciation Value 2017 S 2018 2019 2020 2021 Units-of-production method: Annual Accumulated Book Year Depreciation. Depreciation Value 2017 $ 2018 2019 2020 2021 2. In this exercise. The units of production method results in a depreciation pattern opposite to which depreciation method?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Straight-Line and Units-of-Production Methods Assume that Sample Company purchased factory equipment on January 1, 2017, for $90,000. The equipment has an estimated life of five years and an estimated residual value of $9,000. Sample's accountant is considering whether to use the straight-line or the units-of-production method to depreciate the asset. Because the company is beginning a new production process, the equipment will be used to produce 10,000 units in 2017, but production subsequent to 2017 will increase by 10,000 units each year. Required: 1. Calculate the depreciation expense, accumulated depreciation, and book value of the equipment under both methods for each of the five years of its life. Enter all amounts as positive values. Straight-line method: Annual Accumulated Book Year Depreciation Depreciation Value 2017 2018 2019 2020 2021 Units-of-production method: Annual Accumulated Year Depreciation Depreciation 2017 2018 2019 2020 2021 $ $ Book Value $ 2. In this exercise, The units of production method results in a depreciation pattern opposite to which depreciation method?
Transcribed Image Text:Straight-Line and Units-of-Production Methods Assume that Sample Company purchased factory equipment on January 1, 2017, for $90,000. The equipment has an estimated life of five years and an estimated residual value of $9,000. Sample's accountant is considering whether to use the straight-line or the units-of-production method to depreciate the asset. Because the company is beginning a new production process, the equipment will be used to produce 10,000 units in 2017, but production subsequent to 2017 will increase by 10,000 units each year. Required: 1. Calculate the depreciation expense, accumulated depreciation, and book value of the equipment under both methods for each of the five years of its life. Enter all amounts as positive values. Straight-line method: Annual Accumulated Book Year Depreciation Depreciation Value 2017 2018 2019 2020 2021 Units-of-production method: Annual Accumulated Year Depreciation Depreciation 2017 2018 2019 2020 2021 $ $ Book Value $ 2. In this exercise, The units of production method results in a depreciation pattern opposite to which depreciation method?
Accelerated Depreciation Koffman's Warehouse purchased a forklift on January 1, 2017, for $150,000. The forklift is expected to last for five years and have a residual value of $15,000. Koffman's uses the double-declining-balance method for depreciation. Required: 1. Calculate the depreciation expense, accumulated depreciation, and book value for each year of the forklift's life. If necessary, round any depreciation calculations to the nearest dollar. Accumulated Depreciation Year 2017 2018 2019 2020 2021 Annual Depreciation Activity Accounts Statement(s) 2. Identify and analyze the effect of the transaction for depreciation for 2017. Book Value Assets $ How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. 3. Refer to Exhibit 8-2. Balance Sheet Liabilities What factors may have influenced Koffman's to use the double-declining-balance method? Koffman's may believe that the double-declining-balance method years. Stockholders' Equity Revenues Income Statement the revenues produced by the asset. Koffman's may also choose this method because it allows Expenses Net Income depreciation to be taken in the early years of the asset life and thus taxes until the later
Transcribed Image Text:Accelerated Depreciation Koffman's Warehouse purchased a forklift on January 1, 2017, for $150,000. The forklift is expected to last for five years and have a residual value of $15,000. Koffman's uses the double-declining-balance method for depreciation. Required: 1. Calculate the depreciation expense, accumulated depreciation, and book value for each year of the forklift's life. If necessary, round any depreciation calculations to the nearest dollar. Accumulated Depreciation Year 2017 2018 2019 2020 2021 Annual Depreciation Activity Accounts Statement(s) 2. Identify and analyze the effect of the transaction for depreciation for 2017. Book Value Assets $ How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. 3. Refer to Exhibit 8-2. Balance Sheet Liabilities What factors may have influenced Koffman's to use the double-declining-balance method? Koffman's may believe that the double-declining-balance method years. Stockholders' Equity Revenues Income Statement the revenues produced by the asset. Koffman's may also choose this method because it allows Expenses Net Income depreciation to be taken in the early years of the asset life and thus taxes until the later
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