Most non-current assets do not have a perpetual existence, but have finite or limited lives. These types of non-current assets are depreciated. Suppose your company purchases a machine for £10 million that is expected to have a useful economic life of four years and will have no residual value at the end of four years. You company depreciates all machines using the straight- line method. a. What is the depreciation expense for the first year? b. What is the machine's carrying amount in the balance sheet after one year in use? c. Why do companies depreciate non-current assets instead of recognizing the full cost of the assets as an expense in the period in which they were purchased?

Most non-current assets do not have a perpetual existence, but have finite or limited lives. These types of non-current assets are depreciated. Suppose your company purchases a machine for £10 million that is expected to have a useful economic life of four years and will have no residual value at the end of four years. You company depreciates all machines using the straight- line method. a. What is the depreciation expense for the first year? b. What is the machine's carrying amount in the balance sheet after one year in use? c. Why do companies depreciate non-current assets instead of recognizing the full cost of the assets as an expense in the period in which they were purchased?

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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A5
A copy machine costs $45,000 when new and has accumulated depreciation of $44,000. Suppose Print and Photo Center junks this machine and receives nothing. What is the result of the disposal transaction? a. No gain or loss b. Gain of $1,000 c. Loss of $1,000 d. Loss of $45,000
The term depreciation refers to how the value of an asset (such as a car) decreases over time. There are several different approaches for calculating depreciation. Part A: In the straight-line method of calculating depreciation, the value of the item is reduced by the same amount each year. Suppose a company purchases a car for $24000. Using straight-line depreciation, the value of the car may be reduced by $2500 each year. Determine a formula for S(t), the value of the car t years after purchase. Answer: Part B: After five years, the value of the car, using the straight-line method, will be $ Part C: After twelve years, the value of the car, using the straight-line method, will be Part D: In the declining balance method of depreciation, the value of the item is reduced by the same percentage each year. Suppose the $24000 car is depreciated at a rate of 14% each year. Determine a formula for D(t), the value of the car t years after purchase. Answer: Part E: After five years, the value…
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What is the per-year depreciation amount if straight-line depreciation is used? Suppose a business purchases a machine for $10,000. The useful life is estimated to be 5 years, and the income tax rate is 25%. In the first year, the company makes $5,000 worth of sales using the machine, and operational expenses were $1,500.
2. Clayton Corporation recently purchased a new machine for $307,890 with an eight-year life. The old equipment has a remaining life of eight years and no disposal value at the time of replacement. Net cash flows will be $90,000 per year. What is the internal rate of return? a) 24% b) 29%c) 33%d) None of the above
i.3
A copy machine costs $41,000 when new and has accumulated depreciation of $35,000. Suppose Hilton Copy Center discards this machine and receives nothing. What is the result of the disposal transaction? A. No gain or loss B. Gain of $6,000 C. Loss of $40,000 D. Loss of $6,000
If the salvage value of an asset is nil and it is depreciated by the double-declining balance method, what percentage of the asset’s first cost will remain after its 5-year life?
the answer to this question is Q2.17a= $11,200 , Q2.17b= $5734 , Q2.17c=$2936 but we just need to find how we get that answer for these questions please help
29. X Corporation is considering buying a $25,000 machine. Its estimated useful life is 5 years, with no salvage value. X anticipates annual net income after taxes of $1,500 from the new machine. What is the rate of return on average investment, assuming that X uses straight-line depreciation and that the net income is earned uniformly throughout each year? A. 6.0% B. 8.0% C. 12.0% D. 26.0% E. 52.0%