answer this general accounting question Atlas Corporation uses the straight-line depreciation method. Assets purchasedbetween the 1st and 10th of the month are depreciated for the entire month;assets purchased after the 10th of the month are treated as though they wereacquired the following month. On March 15, 2022, Atlas Corporationpurchased manufacturing equipment for $96,000 that it expects to last for 8years; the company expects the equipment to have a residual value of $8,000.What is the 2022 depreciation expense for the manufacturing equipment?

Step 1: Calculation of Annual Depreciation ExpenseOriginal Cost = $96,000Residual Value =…

Answered: Atlas Corporation uses the…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges

Section: Chapter Questions

Problem 1BD

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Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero. Bliss uses the straight -line method of depreciation. At the beginning of the sixth year, the assets book value is 200,000 and Bliss changes the estimate of the assets life to 25 years, so that 20 years now remain in the assets life. Explain how this change will be accounted for in Blisss financial statements, and compute the current and future annual depreciation expense.
On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.
On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.
Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.
Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.
Gwynedd Industries uses straight-line depreciation on all of its depreciable assets. The company records annual depreciation expense at the end of each calendar year. On January 1, 2020, the company purchased a machine costing $170,000, and it has an estimated useful life of 15 years and an estimated residual value of $26,000. Depreciation for partial years is rounded to the nearest full month. In 2024, management decided to revise its estimated life from 18 years to 25 years. No change was made in the estimated residual value. The revised estimate of the useful life was decided prior to recording annual depreciation expense for the year ended December 31, 2024. Instructions: a) Prepare journal entries in chronological order for the given events, beginning with the purchase of machinery on January 1, 2020. Record depreciation expense separately for each year 2020 through 2024 (5 separate entries for each year's depreciation) (Hint: record the purchase and annual depreciation for each…
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Swindall Industries uses straight-line depreciation on all of its depreciable assets. The company records annual depreciation expense at the end of each calendar year. On January 11, 2017, the company purchased a machine costing $117,000. The machine's useful life was estimated to be 12 years with an estimated residual value of $17,200. Depreciation for partial years is recorded to the nearest full month. In 2021, after almost five years of experience with the machine, management decided to revise its estimated life from 12 years to 20 years. No change was made in the estimated residual value. The revised estimate of the useful life was decided prior to recording annual depreciation expense for the year ended December 31, 2021. a. Prepare journal entries in chronological order for the given events, beginning with the purchase of the machinery on January 11, 2017. Show separately the recording of depreciation expense in 2017 through 2021. (Do not round intermediate calculations. Round…
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Howarth Manufacturing Company purchased equipment on June 30, 2020, at a cost of $125,000. The residual value of the equipment was estimated to be $8,000 at the end of a five-year life. The equipment was sold on March 31, 2024, for $34,000. Howarth uses the straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service. Required: 1. Prepare the journal entry to record the sale. 2. Assuming that Howarth had instead used the double-declining-balance method, prepare the journal entry to record the sale.
Burrell Company purchased a machine for $10,000 on January 2, 2019. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $5,000 each year. The tax rate is 20%. Compute the rate of return earned on the average net asset value by the company each year of the asset's life under the double declining balance depreciation method for the following years: 2019: 2020: 2021: 2022: 2023:

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