Martinez Corp. purchased a machine on July 1, 2023, for $30,845. Martinez paid $250 in title fees and a legal fee of $325 related to the machine. In addition, Martinez paid $580 in shipping charges for delivery, and $400 to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 10 years, a total expected life of 12 years, a residual value of $6,000, and no salvage value. Martinez uses straight-line depreciation. (a) Calculate the 2023 depreciation expense if Martinez prepares financial statements in accordance with IFRS. Depreciation expense $

Martinez Corp. purchased a machine on July 1, 2023, for $30,845. Martinez paid $250 in title fees and a legal fee of $325 related to the machine. In addition, Martinez paid $580 in shipping charges for delivery, and $400 to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 10 years, a total expected life of 12 years, a residual value of $6,000, and no salvage value. Martinez uses straight-line depreciation. (a) Calculate the 2023 depreciation expense if Martinez prepares financial statements in accordance with IFRS. Depreciation expense $

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 8PB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is...

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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.
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a seventeen-year remaining legal life was purchased for $850,000. The patent will be usable for another six years. B. A patent was acquired on a new tablet. The cost of the patent itself was only $12,000, but the market value of the patent is $150,000. The company expects to be able to use this patent for all twenty years of its life.
The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000. B. A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000. Determine the annual amortization amount for each intangible asset.
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.
Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a life of twenty years, but Calico expects to be able to sell the drug for fifty years. Calculate the amortization expense and record the journal for the first years expense.
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a ten-year remaining legal life was purchased for $300,000. The patent will be usable for another eight years. B. A patent was acquired on a new smartphone. The cost of the patent itself was only $24,000, but the market value of the patent is $600,000. The company expects to be able to use this patent for all twenty years of its life.
Utica Machinery Company purchases an asset for 1,200,000. After the machine has been used for 25,000 hours, the company expects to sell the asset for 150,000. What is the depreciation rate per hour based on activity?
Urquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the assets life, and create the journal entry for year eleven.
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.
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 the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Broadway Limited (“Broadway”) purchased a piece of equipment on 1 February 2022 and had it fully set-up and operational on that date. The equipment was purchased for $160,000. In addition to the purchase price, Braodway spent $20,000 to transport the equipment on site and $30,000 of engineering fees to set-up the equipment. It had an estimated useful life of 10 years and an estimated residual value of $30,000. Each year $3,000 is spent on repairs and maintenance. On 1 July 2024, the equipment was sold for $82,500 cash. Broadway’s financial year end balance date is 30 June (ignore GST). Record the general journal entry to record the depreciation expense for the equipment for the year ending 30 June 2022 if Broadway uses the diminishing-balance depreciation method at a rate of 30%.
Broadway Limited (“Broadway”) purchased a piece of equipment on 1 February 2022 and had it fully set-up and operational on that date. The equipment was purchased for $160,000. In addition to the purchase price, Braodway spent $20,000 to transport the equipment on site and $30,000 of engineering fees to set-up the equipment. It had an estimated useful life of 10 years and an estimated residual value of $30,000. Each year $3,000 is spent on repairs and maintenance. On 1 July 2024, the equipment was sold for $82,500 cash. Broadway’s financial year end balance date is 30 June (ignore GST). Record the general journal entry required for the disposal of the equipment on 1 July 2024 if Broadway uses the straight-line depreciation method.