Blake furniture recently purchased new equipment for its plant. The list price of the equipment was $40,000.Company paid sales taxes of $2,100 at the date of purchase. Freight charges for the equipment totaled $680. Installation and training costs related to the equipment amounted to $900. During installation, one of the pieces of equipment was accidentally damaged by an employee. It cost $400 to repair this damage. Blake furniture will depreciate this equipment by the straight-line method (half-year convention) and 150% declining balance method over an estimated useful life of 4 years assuming a $3,000 scrap value. Prepare depreciation schedules. Give reasons for switching to straight line method in both the accelerated methods. Management wants to report the highest possible earnings in its financial statements, yet it also wants to minimize its taxable income reported to the tax authorities. Explain how both of these objectives can be met. Depreciation is often considered as major source of funds. Do you agree? Why Which tangible assets are depreciated and which are not?
Blake furniture recently purchased new equipment for its plant. The list price of the equipment
was $40,000.Company paid sales taxes of $2,100 at the date of purchase. Freight charges for the
equipment totaled $680. Installation and training costs related to the equipment amounted to $900.
During installation, one of the pieces of equipment was accidentally damaged by an employee. It
cost $400 to repair this damage. Blake furniture will
method (half-year convention) and 150% declining balance method over an estimated useful life
of 4 years assuming a $3,000 scrap value.
Prepare depreciation schedules.
Give reasons for switching to
Management wants to report the highest possible earnings in its financial statements, yet it
also wants to minimize its taxable income reported to the tax authorities. Explain how both
of these objectives can be met.
Depreciation is often considered as major source of funds. Do you agree? Why
Which tangible assets are depreciated and which are not?
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