North Ltd. purchased a building in 20X5 for $1,200,000. Straight-line depreciation was used, with a useful life of 40 years and aresidual value of $200,000. A full year of depreciation was charged in 20X5.In 2008, the company decided to switch depreciation methods to declining balance, using a rate of 10%. The tax rate is 30%.Required:1. Assume this is a change in estimate, and calculate 20X8 depreciation expense.Depreciation expense$112,5002. Assume this is a change in policy, and calculate 20X8 depreciation expense and the cumulative effect of the change on 20X8opening retained earnings.Depreciation expense$ 240,000

The objective of the question is to calculate the depreciation expense for the year 2008 under two…

Answered: North Ltd. purchased a building in 20X5…

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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On Jan. 2, 2014, Sirap Co. bought a mounding machine for $400,000. The machine has an 8-year useful life with Zero residual value. The company used the Straight-Line Depreciation method. On Jan. 2, 2017, the company changed to the Double Declining Balance depreciation method. Compute depreciation expense that should be taken for 2017. Ignore all income tax considerations.
Aa.2
On May 22, 2020, Colossal Corporation purchased machinery for $80,000. The useful life of this machinery is estimated at 10 years, with a $10,000 residual value. (i). Assume that Colossal uses straight-line depreciation and the half-year convention. Depreciation expense on this machinery will be: Select one: O a. $4,000 in 2020 and $8,000 in 2021 O b. $3,500 in 2020 and $7,000 in 2021 O c. $8,000 in 2020 and $8,000 in 2021 d. $7,000 in 2020 and $7,000 in 2021
North Ltd. purchased a building in 20X5 for $1,200,000. Straight-line depreciation was used, with a useful life of 40 years and a residual value of $200,000. A full year of depreciation was charged in 20X5. In 2008, the company decided to switch depreciation methods to declining balance, using a rate of 10%. The tax rate is 30%. Required: 1. Assume this is a change in estimate, and calculate 20X8 depreciation expense. Depreciation expense $112,500 2. Assume this is a change in policy, and calculate 20X8 depreciation expense and the cumulative effect of the change on 20X8 opening retained earnings. Depreciation expense $ 240,000
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North Ltd. purchased a building in 20X5 for $1,450,000. Straight-line depreciation was used, with a useful life of 40 years and a residual value of $470,000. A full year of depreciation was charged in 20X5. In 20X8, the company decided to switch depreciation methods to declining balance, using a rate of 10%. The tax rate is 20%. Required: 1. Assume this is a change in estimate, and calculate 20X8 depreciation expense. Depreciation expense $ 137,650 2. Assume this is a change in policy, and calculate 20X8 depreciation expense and the cumulative effect of the change on 20X8 opening retained earnings. Depreciation expense Cumulative effect
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Burrell Company purchased a machine for $33,000 on January 2, 2016. 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 $16,500 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.

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