Depreciation and Rate of Return Burrell Company purchased a machine for $46,000 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 $23,000 each year. The tax rate is 30%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset. Straight-line method. If required, round to one decimal place. 2019 2020 % 2021 2022 2023 Double-declining-balance depreciation method. Round to two decimal places. Round your intermediate dollar value calculations to the nearest whole number. 2019 2020 2021 2022 2023

Depreciation and Rate of Return Burrell Company purchased a machine for $46,000 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 $23,000 each year. The tax rate is 30%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset. Straight-line method. If required, round to one decimal place. 2019 2020 % 2021 2022 2023 Double-declining-balance depreciation method. Round to two decimal places. Round your intermediate dollar value calculations to the nearest whole number. 2019 2020 2021 2022 2023

Name: Depreciation and Rate of ReturnBurrell Company purchased a machine fo
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: Depreciation and Rate of ReturnBurrell Company purchased a machine for $46,000 on January 2, 2019. Themachine has an estimated service life of 5 years and a zero estimated residualvalue. The asset earns income before depreciation and income taxes of

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Depreciation Methods Lord Company purchased a machine on January 2, 2019, for $70,000. The machine…

A: Depreciation is a charge on an asset. It is recorded to show the reduction in the cost of the asset…

Q: Depreciation and Rate of Return Burrell Company purchased a machine for $31,000 on January 2, 2019.…

A: The deprecation under straight line method is calculated as:= (Cost of the asset - Residual Method)…

Q: Depreciation and Rate of Return Burrell Company purchased a machine for $43,000 on January 2, 2019.…

A: Machine cost $43,000 Less: Residual value $- Depreciable cost $43,000 Divided by: Estimated…

Q: uary 1, 2019, that originally cost $150,000 is being depreciated on a straight-line basis over an…

A: The Correct Answer is option d.($13,875) Depreciation charged under original life for 2019 and 2020…

Q: A new barcode reading device has an inslated cost basis of $21,760 and an estimated service ide of…

A: Depreciation is a way to allocate the cost of an asset over the total useful life of an asset. Thus,…

Q: A machinery that costs $100,000, has a service life of 5 years and a salvage value of $10,000 at the…

A: Initial Investment $ 1,00,000.00 Salvage Value $ 10,000.00 Tax Rate 30% MARR After…

Q: On January 1, 2021, the Allegheny Corporation purchased equipment for $115,000. The estimated…

A: 1) Straight line Depreciation Method: Cost of equipment = 115000 Ueful life = 10 years Residual life…

Q: Depreciation Sosa Enterprises purchased a new machine for $11,800 to make cork stoppers for wine…

A: MACRS Depreciation Method:MACRS stands for Modified Accelerated Cost Recovery System and is a…

Q: Depreciation ProblemA machine which cost $400,000 is acquired on August 1, 2020. Its estimated…

A: Depreciation: Depreciation is a method of reducing the capitalized cost of long-lived operating…

Q: Matlock inc .acquires a delivery at cost of $50000 on January 1,2022. The truck is expected to…

A: Depreciation is a reduction in the value of assets due to the usage of that asset. We can evaluate…

Q: Depreciation for Partial Periods Storm Delivery Company purchased a new delivery truck for $69,000…

A: Depreciation is the loss in the value of the asset caused due to its usage, wear and tear.There are…

Q: 2. Double-declining-balance. Double-Declining-Balance Method x Choose Denominator: x Fraction of…

A: Double-declining balance method (Accelerated method): In this method of depreciation, the…

Q: Norman Delivery Company purchased a new delivery truck for $69,000 on April 1, 2019. The truck is…

A: Depreciation expense is a form of monetary reduction in the value of the asset throughout its life.…

Q: Required information A potential investment has a cost of $555,000 and a useful life of 6 years.…

A: Under the capital budgeting process, different projects are evaluated with an intention of selection…

Q: Forrester Company purchased a machine on January 1, 2019 for $60,000, with a 5-year life, and a…

A: Double declining depreciation rate = Straight line depreciation rate x 2 = (100/5 years) x 2 = 40%

Q: On January 1, 2019, Beldon Inc. purchased a new machine for $60,000. Its estimated useful life is…

A: Double declining balance method is an accelerated method of depreciation where asset is depreciated…

Q: On January 1, 2018, Check Co. bought a machine for $15,000. Residual value was estimated to be…

A: The answer is as fallows

Q: 120,000. The equipment produced 52,000 units in 2023. Required Determine the estimated residual…

A: Given:Equipment purchased $135000Estimated useful life is 4 years or 200,000…

Q: On January 1, 2018, Sanderson, Inc. acquired a machine for $1,200,000. The estimated useful life of…

A: Investment in machine = $1,200,000 Life of equipment = 5 years Salvage value = $72,000 Number of…

Q: Malone Delivery Company purchased a new delivery truck for $63,000 on April 1, 2019. The truck is…

A: Depreciation is a non-cash expense which is used to show a decline in an assets' value due to its…

Q: Analysis Component: Which method will result in the greatest: a. Total assets being reported on the…

A: Cost of Computer Equipment $ 1,45,000 Salvage Value $ 24,000 Life 5 Year…

Q: On October 1, 2021, the Allegheny Corporation purchased equipment for $115,000. The estimated…

A: Depreciation is a way to reduce the cost of asset over a period of time due to usage, wear &…

Q: On October 1, 2021, the Allegheny Corporation purchased equipment for $123,000. The estimated…

A: Under unit of production method of depreciation, depreciation is calculated on the basis of the…

Q: Coronado Company purchased

A: Business entities are required to compute the depreciation expense so that in the balance the assets…

Q: On January 1, 2019, Williams Company purchased a copy machine. The machine costs $160,000, its…

A: Depreciation Expenses - Depreciation Expenses are the expense incurred on the wear and tear of the…

Q: Depreciation and Rate of Return Burrell Company purchased a machine for $47,000 on January 2, 2019.…

A: In a double declining method of depreciation, higher depreciation is charged in the initial years of…

Q: Double-declining-balance depreciation method. Round to two decimal places. Round your intermediate…

A: Formulae for Double Declining balance method is Depreciation=2* straight line depreciation…

Q: A potential investment has a cost of $542,500 and a useful life of 7 years. Annual cash sales from…

A: 1) Calculation of NPV (in case of investment before tax): Year 1 2 3 4 5 6 7 Sales 219202…

Q: Storm Delivery Company purchased a new delivery truck for $69,000 on April 1, 2019. The truck is…

A: Depreciable cost=Purchase value of truck-Residual value=$69,000-$3,000=$66,000

Q: Required information [The following information applies to the questions displayed below.] Tory…

A: Answer:- Depreciation meaning:- Because of the usage, deterioration, or obsolescence, an asset's…

Q: What is the after-tax salvage value of a 3-year MACRS machine with the $10,000 purchase price if it…

A: After tax salvage value can be calculated by using equation below. After-tax salvage value = Salvage…

Q: Work in process (1/1) Direct materials Raw materials inventory (1/1) Add: Raw materials purchases…

A: The cost of goods manufactured is computed by the business entities so as to determine the cost…

Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

100%

Depreciation and Rate of Return
Burrell Company purchased a machine for $46,000 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 $23,000
each year. The tax rate is 30%.
Required:
Compute the rate of return earned (on the average net asset value) by the company
each year of the asset's life under the straight-line and the double-declining-balance
depreciation methods. Assume that the machine is the company's only asset.
Straight-line method. If required, round to one decimal place.
2019
2020
%
2021
2022
2023
Double-declining-balance depreciation method. Round to two decimal places.
Round your intermediate dollar value calculations to the nearest whole
number.
2019
2020
2021
2022
2023

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

devrat
Depreciation for Partial Periods: Hathaway Company purchased a copying machine for $8,700 on October 1, 2019. The machine's residual value was $500 and its expected service life was 5 years. Hathaway computes depreciation expense to the nearest whole month. Required: Compute depreciation expense for 2019 and 2020 using the following methods: (Round your answers to the nearest dollar.) Straight-line method 2019 $ fill in the blank 2020 $ fill in the blank 2 Sum-of-the-years'-digits method 2019 $ fill in the blank 2020 $ fill in the blank Double-declining-balance method 2019 $ fill in the blank 5 2020 $ fill in the blank 6 Next Level Which method produces the highest book value at the end of 2020? Next Level Which method produces the highest charge to income in 2020? Next Level Which of the following statements regarding depreciation is/are correct? All methods result in higher depreciation expense in the early years of the life of the asset. All methods result in the same total amount…
On October 1, 2021, the Allegheny Corporation purchased equipment for $123,000. The estimated service life of the equipment is 10 years and the estimated residual value is $2,000. The equipment is expected to produce 220,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. Double-declining-balance. Double-Declining-Balance Method Choose Numerator: x Choose Denominator: x Fraction of = Depreciation Expense Formula Beginning Book Value x Double the Straight-line Rate x Fraction of Year = Depreciation Amount for 2021 $ _________________ x __________________ % x _____________ = _________ Amount for 2022 $_________________ x…
Mountain View Resorts purchased equipment at the beginning of 2021 for $40,000. Residual value at the end of an estimated four- year service life is expected to be $8,200. The machine operated for 1,900 hours in the first year and the company expects the machine to operate for a total of 11,000 hours over its four-year life. Calculate depreciation expense for 2021, using each of the following depreciation methods: (1) straight-line, (2) double-declining- balance, and (3) activity-based. (Round your intermediate calculations to 2 decimal places.) Depreciation Expense Straight-line Double-declining-balance Activity-based
Mickey Mouse purchased a machine for $ 260,000 from Donald Duck on January 3, 2022. It made the following estimates: Service life 5 years or 20,000 hours Production 300,000 units Residual value $ 40,000 In 2022, Mickey uses the machine for 2000 hours and produces 50,000 units. Required: Compute the depreciation for 2022 under each of the following methods: straight line sum-of-the-years-digits double-declining-balance activity method based on hours worked activity method based on units of output
On January 1, 2020, Bing Company acquired equipment on credit. The terms were $8,000 cash down payment plus payments of $6,000 on January 1 for each of the next four years. The implicit interest rate was 6%. The equipment’s list price was $30,000. Additional costs of $2,000 were incurred to install the equipment. Determine the value at which Ling should report the acquired asset. Show your calculations. For any measurement involving present value concepts, provide your calculations.
A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $10,000. Income Year Year 1 $3,300 Initial invest Year 1 Year 2 Year 3 Year 4 Year 5 Year 2 $8,300 Compute the machine's payback period. Note: Round payback period answer to 2 decimal places. Net Income Depreciation 3,300 8,300 30,000 12,400 33,200 Year 3 $30,000 Year 4 $12,400 Net Cash Flow $ (50,000) $ Payback period = Year 5 $33,200 Cumulative Net Cash Flow (50,000) 0 0
Depreciation and Rate of Return Burrell Company purchased a machine for $11, 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 $5,500 each year. The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight - line and the double declining - balance depreciation methods. Assume that the machine is the company's only asset. Straight - line method. If required, round to one decimal place. 2019 fill in the blank 1% 2020 fill in the blank 2% 2021 fill in the blank 3% 2022 fill in the blank 4% 2023 fill in the blank 5% Double - declining - balance depreciation method. Round to two decimal places. Round your intermediate dollar value calculations to the nearest whole number. 2019 fill in the blank 6% 2020 fill in the blank 7% 2021 fill in the blank 8% 2022 fill in the…
Kansas Enterprises purchased equipment for $80,500 on January 1, 2021. The equipment is expected to have a ten-year service life, with a residual value of $6,600 at the end of ten years. Using the straight-line method, depreciation expense for 2021 would be:
A machine can be purchased for $90,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $18,000 Income Year 1 Year 3 Year 5. $6,000 $36,000 $60,000 Compute the machine's payback period. (Round payback period answer to 2 decimal places.) Year Initial invest - Year 1 Year 2 Year 3 Year 4 Year 5 Net Income Depreciation $ Year 2 $15,000 6,000 15,000 36,000 22,500 60,000 Year 4 $22,500 Net Cash Flow $ Cumulative Net Cash Flow (90,000) $ Payback period- (90,000)
Book value and taxes on sale of assets- Troy Industries purchased a new machine 3 year(s) ago for $76,000. It is being depreciated under MACRS with a 5-year recovery period using the schedule. Assume 21% ordinary and capital gains tax rates.a. What is the book value of the machine? b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $91,200; $53,200; $22,040; and $15,400.
On September 30, 2021, Bricker Enterprises purchased a machine for $200,000. The estimated service life is 10 years with a $20,000 residual value. Bricker records partial-year depreciation based on the number of months in service.Depreciation (to the nearest dollar) for 2022, using sum-of-the-years'-digits method, would be: Multiple Choice $31,909. $29,455. $35,456. $54,000.