A10 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:AssetsAcquisition CostResidualMethodUseful lifeTruck1/1/2023Warehouse1/1/20231/1/20231/1/2023Multiple Choice$1,280,009$1,286,364$1,263,040500,0002,000,000$1,210,909100,000800,000FactoryMachineryUnit-of productionMachinery'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 isnow 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 thefactory 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?3,000,000700,0002,000,000 500,000Straight-lineSum-of-the years'-digitsDouble-declining10101010

Depreciation is the reduction in the value of asset due tonormal wear and tearEffluxion of…

Answered: At the end of 2023

Business

Accounting

At the end of 2023

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.6E

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Question

A10

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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