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Blake's Bakery purchased new equipment for $45,000 on January 1, 2024. The equipment has an estimated useful life of 5 years and a salvage value of $5,000. The company uses the straight-line depreciation method and needs to calculate the annual depreciation expense, accumulated depreciation after 3 years, and the book value of the equipment at the end of year 3. The equipment is expected to be operational for 2,000 hours each year. The company wants to compare both straight-line depreciation and units-of-production depreciation methods. Calculate both methods and determine which would be more beneficial for tax purposes if the equipment is used for 2,200 hours in year 1, 1,800 hours in year 2, and 2,100 hours in year 3.

Blake's Bakery purchased new equipment for $45,000 on January 1, 2024. The equipment has an estimated useful life of 5 years and a salvage value of $5,000. The company uses the straight-line depreciation method and needs to calculate the annual depreciation expense, accumulated depreciation after 3 years, and the book value of the equipment at the end of year 3. The equipment is expected to be operational for 2,000 hours each year. The company wants to compare both straight-line depreciation and units-of-production depreciation methods. Calculate both methods and determine which would be more beneficial for tax purposes if the equipment is used for 2,200 hours in year 1, 1,800 hours in year 2, and 2,100 hours in year 3.

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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Blake's Bakery purchased new equipment for $45,000 on January 1, 2024. The equipment has an estimated useful life of 5 years and a salvage value of $5,000. The company uses the straight-line depreciation method and needs to calculate the annual depreciation expense, accumulated depreciation after 3 years, and the book value of the equipment at the end of year 3. The equipment is expected to be operational for 2,000 hours each year. The company wants to compare both straight-line depreciation and units-of-production depreciation methods. Calculate both methods and determine which would be more beneficial for tax purposes if the equipment is used for 2,200 hours in year 1, 1,800 hours in year 2, and 2,100 hours in year 3.
Transcribed Image Text:Blake's Bakery purchased new equipment for $45,000 on January 1, 2024. The equipment has an estimated useful life of 5 years and a salvage value of $5,000. The company uses the straight-line depreciation method and needs to calculate the annual depreciation expense, accumulated depreciation after 3 years, and the book value of the equipment at the end of year 3. The equipment is expected to be operational for 2,000 hours each year. The company wants to compare both straight-line depreciation and units-of-production depreciation methods. Calculate both methods and determine which would be more beneficial for tax purposes if the equipment is used for 2,200 hours in year 1, 1,800 hours in year 2, and 2,100 hours in year 3.
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