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At the end of 2023

At the end of 2023

FINANCIAL ACCOUNTING
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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At the end of 2022, GM did not have any PP&E. On Jan 1, 2023, GM purchased the following assets. Details for setting up depreciation schedules are summarized below: Assets Acquisition Cost Residual Method Useful life Truck 1/1/2023 Warehouse 1/1/2023 1/1/2023 1/1/2023 Multiple Choice $1,280,009 $1,286,364 $1,263,040 500,000 2,000,000 $1,210,909 100,000 800,000 Factory Machinery Unit-of production Machinery's estimated total production capacity is 50,000 units of cars. During 2023, GM produced a total of 10,000 units using the Machinery. On Dec 31, 2023, sudden changes in the operational and market conditions indicate that the sum of undiscounted future cash flows from the factory is now estimated at $1,800,000. The fair value of the Factory as of the date is $1,500,000. After recognizing depreciation expense for 2023 as scheduled, GM wrote-off the factory. The remaining service life is reduced to additional 5 years and the residual value is updated to $150,000. Depreciation for the factory using these new parameters will start from 2024 with the double-declining method. During 2024, GM produced a total of 15,000 units using the Machinery. What is the total amount of depreciation expense GM will recognize at the end of 2024? 3,000,000 700,000 2,000,000 500,000 Straight-line Sum-of-the years'- digits Double-declining 10 10 10 10
Transcribed Image Text:At the end of 2022, GM did not have any PP&E. On Jan 1, 2023, GM purchased the following assets. Details for setting up depreciation schedules are summarized below: Assets Acquisition Cost Residual Method Useful life Truck 1/1/2023 Warehouse 1/1/2023 1/1/2023 1/1/2023 Multiple Choice $1,280,009 $1,286,364 $1,263,040 500,000 2,000,000 $1,210,909 100,000 800,000 Factory Machinery Unit-of production Machinery's estimated total production capacity is 50,000 units of cars. During 2023, GM produced a total of 10,000 units using the Machinery. On Dec 31, 2023, sudden changes in the operational and market conditions indicate that the sum of undiscounted future cash flows from the factory is now estimated at $1,800,000. The fair value of the Factory as of the date is $1,500,000. After recognizing depreciation expense for 2023 as scheduled, GM wrote-off the factory. The remaining service life is reduced to additional 5 years and the residual value is updated to $150,000. Depreciation for the factory using these new parameters will start from 2024 with the double-declining method. During 2024, GM produced a total of 15,000 units using the Machinery. What is the total amount of depreciation expense GM will recognize at the end of 2024? 3,000,000 700,000 2,000,000 500,000 Straight-line Sum-of-the years'- digits Double-declining 10 10 10 10
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