On January 1, 2020, Button Inc. purchased the following two machines for use in its productionprocess.Machine A: Electric ForkliftCash Price:$50,000Other Expenditures included:Sales Tax$2,000Shipping CostsInsurance During Shipping$250$100Installation and Testing Costs:$100Oil and Lubricants to be used with the machinery during the firstyear of operationsButton estimates that the useful life of the machine is 5 years with a $4,000 residual valueremaining at the end of that time period. Assume that the straight-line method of depreciationis used.$500Machine B: Gas-Powered WheelbarrowRecorded Cost:$115,000Button estimates that the useful life of the machine is 5 years with a $10,000 residual valueremaining at the end of that time period.Required:1. For the electric forklift:а.What is the cost that Button should record for the purchase on January 1, 2020?b. What is the depreciation expense to be recorded in 2020?c. At the end of Year 3 (2022), Button reassesses and concludes that the machine hasremaining useful life of 4 years with a residual value of $1,000. What is the reviseannual depreciation?. For the gas-powered wheelbarrow:a. Calculate the amount of deprecation Button Inc. should record:а. A For the year of 2021, assuming that Button uses the straight-line method ofdepreciationFor the year of 2021, assuming that Button uses the double-declining-balancemethod.**. For the year of 2021, assuming that Button uses the units-of-activity method andestimates that the useful life of the machine is 150,000 units. Actual usage for eachyear is as follows:YearUnits2020202120222023202445,00040,00035,00020,00010,000b. Which method used to calculate depreciation on the gas-powered wheelbarrow reportsthe highest amount of depreciation expense in 2020? The highest total amount over the 4year period?c. If the company sells the gas-powered wheelbarrow on June 30, 2022, for $58,000 cash,would Button Inc. record a gain or loss of how much for this sale? Assuming that Butteuses the straight-line method of depreciation.

Name: On January 1, 2020, Button Inc. purchased the following two machines
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: On January 1, 2020, Button Inc. purchased the following two machines for use in its productionprocess.Machine A: Electric ForkliftCash Price:$50,000Other Expenditures included:Sales Tax$2,000Shipping CostsInsurance During Shipping$250$100Installatio

Since you have asked multiple questions, we will solve the first question for you. If you want any…

Business

Accounting

On January 1, 2020, Button Inc. purchased the following two machines for use in its production process. Machine A: Electric Forklift Cash Price: $50,000 Other Expenditures included: Sales Tax $2,000 Shipping Costs Insurance During Shipping Installation and Testing Costs: $250 $100 $100 Oil and Lubricants to be used with the machinery during the first year of operations Button estimates that the useful life of the machine is 5 years with a $4,000 residual value remaining at the end of that time period. Assume that the straight-line method of depreciation is used. $500 Machine B: Gas-Powered Wheelbarrow Recorded Cost: $115,00C Button estimates that the useful life of the machine is 5 years with a $10,000 residual value remaining at the end of that time period. Required: 1. For the electric forklift: а. What is the cost that Button should record for the purchase on January 1, 2020? b. What is the depreciation expense to be recorded in 2020? c. At the end of Year 3 (2022), Button reassesses and concludes that the machine ha remaining useful life of 4 years with a residual value of $1,000. What is the revis annual depreciation?

On January 1, 2020, Button Inc. purchased the following two machines for use in its production process. Machine A: Electric Forklift Cash Price: $50,000 Other Expenditures included: Sales Tax $2,000 Shipping Costs Insurance During Shipping Installation and Testing Costs: $250 $100 $100 Oil and Lubricants to be used with the machinery during the first year of operations Button estimates that the useful life of the machine is 5 years with a $4,000 residual value remaining at the end of that time period. Assume that the straight-line method of depreciation is used. $500 Machine B: Gas-Powered Wheelbarrow Recorded Cost: $115,00C Button estimates that the useful life of the machine is 5 years with a $10,000 residual value remaining at the end of that time period. Required: 1. For the electric forklift: а. What is the cost that Button should record for the purchase on January 1, 2020? b. What is the depreciation expense to be recorded in 2020? c. At the end of Year 3 (2022), Button reassesses and concludes that the machine ha remaining useful life of 4 years with a residual value of $1,000. What is the revis annual depreciation?

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: 019 20 021 022 20,000 20,000 18,000 12,000 264,000 310,000 134,000 112,000 Calculate the…

A: Deprecaition Expenses Formula to Calculate Straight line method = Cost of Assets - Residual Value /…

Q: operating costs. The new machine would cost $350, lue of the old machine on January 1, year 3, is…

A: The income statement is explained as,

Q: Windsor, Inc. purchased a new machine on October 1, 2022, at a cost of $120,000. The company…

A: Depreciation can be charged on a fixed asset using many methods like straight line method, double…

Q: New Style Corporation is a company that manufactures and sells chairs. On 1/1/20, the company…

A: The formula for the above table:

Q: Current Attempt in Progress The cost of equipment purchased by Bonita, Inc., on June 1, 2020, is…

A: Depreciation is the allocation of cost of asset over time due following reason: Use, Wear and tear;…

Q: Benson Moran manages the cutting department of Greene Campbell Company. He purchased a tree-cutting…

A: A) Recommendation: The old machine should be replaced as the replacement cost (Avoidable cost) is…

Q: Adams Company paid $92.000 to purchase a machine on January 1, Year 1. During Year 3, a…

A: An avoidable cost is one that will not be spent if a specific activity is not carried out. Unlike…

Q: Mohr Company purchases a machine at the beginning of the year at a cost of $34,000. The machine is…

A: Depreciation means the loss in value of assets because of usage of assets , passage of time or…

Q: A machine costing $450,000 with a four-year life and an estimated $30,000 salvage value is installed…

A: Answer) Calculation of Depreciation expense for Year 2 Depreciation expense for Year 2 = Number of…

Q: Clean Air Company makes and sells cloth masks. The company purchased a new automated sewing machine…

A: Depreciation rate per unit = (Cost - Salvage value) / Estimated total units to be produced= ($87,000…

Q: New Style Corporation is a company that manufactures and sells chairs. On 1/1/20, the company…

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

Q: University Car Wash purchased new soap dispensing equipment that cost $255,000 including…

A: Depreciation :The word "depreciation" is defined as an accounting method wherein the cost of…

Q: 1. Rufiel Corporation purchased a new machine on January 1, 2023. The machine cost $300,000 and had…

A: The straight-line method of depreciation spreads the cost of the asset evenly over its useful life.…

Q: Ralph’s Bow Works (RBW) is planning to add a new line of bow ties that will require the acquisition…

A: Cash flow refers to the statement showing the transactions related to cash inflows and outflows in a…

Q: . Prepare a depreciation schedule for six years using the straight-line method.

A: Under straight line method depreciable value of asset is equally depreciated over the estimated life…

Q: Baird Moran manages the cutting department of Greene Benson Company. He purchased a tree-cutting…

A: Avoidable cost are those cost ,which are incurred related to an activity. It means if the business…

Q: Sonic Corporation purchased and installed electronic payment equipment at its drive-in restaurants…

A: Depreciation expense is the one which is charged on the non-current assets. It is reported on the…

Q: Marshall Company purchases a machine for $1,000,000. The machine has an estimated residual value of…

A: To calculate depreciation using the units-of-production method, we need to determine the…

Q: A company that makes micro motion compact coriolis meters purchased a new packaging system for…

A: Replacement study consider most recent data. The total annual benefit on new system can be…

Q: Cheetah Copy purchased a new copy machine. The new machine cost $116,000 including installation. The…

A: The depreciation epxense is charged on fixed assets as reduction in its value with the usage and…

Q: Speed, Inc., is a shipping company. On 1/1/20, the company purchases a new commercial sleeper truck…

A: Introduction: Depreciation: Decreasing value of fixed assets over its useful life period called…

Q: A machine that produces cellphone components is purchased on January 1, 2024, for $163,000. It is…

A: DEPRECIATION EXPENSE Depreciation means gradual decrease in the value of an asset due to normal wear…

Q: A machine costing $1,125,000 with a five-year useful life and a $112,500 salvage value is installed…

A: Depreciation expense :— It is the allocation of depreciable cost of asset over the estimated useful…

Q: University Car Wash purchased new soap dispensing equipment that cost $249,000 including…

A: The depreciation expense is charged on the fixed assets as reduction in the value of the fixed…

Q: A contractor has purchased a wheel loader for $115,000 and plans to use it 2,000 hours per year. The…

A: Answer:- Depreciation meaning:- An asset loses value over time as a result of use, damage or…

Q: On June 30, 2024, Prego Equipment purchased a precision laser - guided steel punch that has an…

A: Depreciation expense:— It is the allocation of depreciable cost of asset over the estimated useful…

Q: Compute the depreciation expense under declining-balance using double the straight-line rate for…

A: Under the double declining method of depreciation, the book value at the beginning of year is…

Q: Cheetah Copy purchased a new copy machine. The new machine cost $120,000 including installation. The…

Q: Baird Moran manages the cutting department of Greene Benson Company. He purchased a tree-cutting…

A: It is the process of making decisions that involve the management of costs in order to achieve…

Q: A machine that cost $475,500, with a four-year life and an estimated $48,000 residual value, was…

A: Depreciation can be calculated on the fixed assets to decline the value of fixed assets due to use,…

Q: Joe Production purchased a new computerized machine at a cost of $450,000. The machine has a…

A: The depreciation expense is charged on the fixed assets as a reduction in the value of the fixed…

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

On January 1, 2020, Button Inc. purchased the following two machines for use in its production
process.
Machine A: Electric Forklift
Cash Price:
$50,000
Other Expenditures included:
Sales Tax
$2,000
Shipping Costs
Insurance During Shipping
$250
$100
Installation and Testing Costs:
$100
Oil and Lubricants to be used with the machinery during the first
year of operations
Button estimates that the useful life of the machine is 5 years with a $4,000 residual value
remaining at the end of that time period. Assume that the straight-line method of depreciation
is used.
$500
Machine B: Gas-Powered Wheelbarrow
Recorded Cost:
$115,000
Button estimates that the useful life of the machine is 5 years with a $10,000 residual value
remaining at the end of that time period.
Required:
1. For the electric forklift:
а.
What is the cost that Button should record for the purchase on January 1, 2020?
b. What is the depreciation expense to be recorded in 2020?
c. At the end of Year 3 (2022), Button reassesses and concludes that the machine has
remaining useful life of 4 years with a residual value of $1,000. What is the revise
annual depreciation?
. For the gas-powered wheelbarrow:
a. Calculate the amount of deprecation Button Inc. should record:
а.

A For the year of 2021, assuming that Button uses the straight-line method of
depreciation
For the year of 2021, assuming that Button uses the double-declining-balance
method.
**. For the year of 2021, assuming that Button uses the units-of-activity method and
estimates that the useful life of the machine is 150,000 units. Actual usage for each
year is as follows:
Year
Units
2020
2021
2022
2023
2024
45,000
40,000
35,000
20,000
10,000
b. Which method used to calculate depreciation on the gas-powered wheelbarrow reports
the highest amount of depreciation expense in 2020? The highest total amount over the 4
year period?
c. If the company sells the gas-powered wheelbarrow on June 30, 2022, for $58,000 cash,
would Button Inc. record a gain or loss of how much for this sale? Assuming that Butte
uses the straight-line method of depreciation.

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

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

A granary purchased tractor for over-the-road hauling for $90,000. It is expected to be of use to the company for 6 years, after which it will be salvaged for $4,000 but was sold at $6,000 at the end of 4 years. During the period of operation it generated an average savings of $170,000, incurring an annual driver costs of $70,000 and annual operating and maintenance cost of $63,000 every year. The granary is considering multiple depreciation methods and has a marginal tax rate of 40 percent, and a MARR of 10 percent after taxes.Answer the following 3 questions based on the above information. 1) Calculate the after tax present worth of the tractor considering depreciation deduction of the tractor’s life using SLN allowances.2) Calculate the after tax present worth of the tractor considering depreciation deduction of the tractor’s life using MACRS-GDS allowances. (MACRS class has to be determined)3) Calculate the after tax present worth present worth of the tractor considering…
The cost of equipment purchased by Charleston, Inc., on January 1, 2020, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of its service life. Its service life is estimated at 7 years, its total working hours are estimated at 42,000, and its total production is estimated at 525,000 units. During 2020, the machine was operated 6,000 hours and produced 55,000 units. During 2021, the machine was operated 5,500 hours and produced 48,000 units. Instructions: Compute depreciation expense on the machine for the year ending December 31, 2020, and the year ending December 31, 2021, using the following methods. a. Straight-line. b. Units-of-output. c. Working hours d. Sum-of-the-years’-digits. e. Declining-balance (twice the straight-line rate).
XYZ Company invests $2,000,000 for a new machine. The new machine will generate an annual income of $450,000 for XYZ. Annual operating costs are $200,000. A maintenance cost of $300,000 will incur every 4 years. The first one is at the end of the 4th year. The useful life of the machine is 20 years, and the salvage value is $500,000. MAŘR of XYZ company is 10%. a- Calculate the IRR for this project. Use linear interpolation to estimate the IRR. Show the steps of your calculation. Is this an acceptable project? b- What is the simple payback period of the project
On January 1, 2023, a machine was purchased for $120,000. The machine has an estimated salvage value of $9,600 and an estimated useful life of 5 years. The machine can operate for 120.000 hours before it needs to be replaced. The company closed its books on December 31 and operates the machine as follows: 2023, 24,000 hours: 2024, 30,000 hours: 2025, 18,000 hours: 2026 3000 hours: and 2027, 12,000 hours
Covington Corporation purchased a vibratory finishing machine for $22,000 in year 0. The useful life of the machine is 10 years, at the end of which the machine is estimated to have a salvage value of zero. The machine generates net annual revenues of $6,500. The annual operating and maintenance expenses are estimated to be $1,500. If Covington's MARR is 13%, how many years will it take before this machine becomes profitable? Assume that the cash flows occur continuously throughout the year. It will take years before this machine becomes profitable. (Round to one decimal place.)
Bridgeport Manufacturing purchased a machine on January 1, 2023 for use in its factory. Bridgeport paid $536,000 for the machine and estimated that it had a useful life of 10 years, at the end of which time the machine was expected to have a residual value of $30,000. During its life, the machine was expected to produce 440,000 units. During 2023, the machine produced 47,400 units, and produced 67,800 in 2024. The machine was subject to a 20% CCA rate, and Bridgeport's year-end was December 31. The machine is eligible for the Accelerated Investment Incentive. Calculate the annual depreciation amount for 2023 and 2024 using the straight-line method. Annual depreciation amount $ 2023 $ 2024
On January 1, 2024, Nimble Delivery Service purchased a truck at a cost of $65,000. Before placing the truck in service, Nimble spent $4,000 painting it, $800 replacing tires, and $9,700 overhauling the engine. The truck should remain in service for five years and have a residual value of $6,000. The truck's annual mileage is expected to be 23,000 miles in each of the first four years and 13,000 miles in the fifth year-105,000 miles in total. In deciding which depreciation method to use, Harvey Wamer, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance) Read the requirements Requirement 1. Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulated depreciation, and asset book value. Begin by preparing a depreciation schedule using the straight-line method. Straight-Line Depreciation Schedule Date 1-1-2024 12-31-2024 12-31-2025…
On January 1, 2024, Nash Company, a small machine-tool manufacturer, acquired for $1,190,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $72,200. Nash estimates that the new equipment can produce 12,000 machine tools in its first year. It estimates that production will decline by 1,140 units per year over the remaining useful life of the equipment. (a1) The following depreciation methods may be used: (1) straight-line, (2) double-declining-balance, (3) sum-of-the-years-digits, and (4) units-of-output. For tax purposes, the class life is 7 years. Use the MACRS tables for computing depreciation. (2) Compute accumulated depreciation under the following methods: (1) straight-line, (2) double-declining-balance, (3) sum-of-the- years'-digits, and (4) units-of-output for the 3-year period ending December 31, 2026. Ignore present value, income tax, and deferred income tax considerations. (Round cost per unit to…
Comfort Corporation is a company that manufactures and sells chairs. On 1/1/21, the company purchases a piece of manufacturing equipment for $6,200,000 cash. The expected residual value is $400,000 and the useful life is 5 years. The company expects to produce 5,000,000 chairs with the equipment – 1,200,000 chairs in 2021; 1,400,000 chairs in 2022; 1,000,000 chairs in 2023; and 600,000 chairs 2024; and 800,000 chairs in 2025. Provide the 2020 adjusting journal entry (both accounts and amounts) that Newell Brands made to record depreciation on its Property and Equipment. Assume that Newell Brands makes one adjusting journal entry for depreciation expense at the end of each fiscal year as part of its adjusting entries.
On January 1, 2024, Trusty Delivery Service purchased a truck at a cost of $62,000. Before placing the truck in service, Trusty spent $3,000 painting it, $1,200 replacing tires, and $3,800 overhauling the engine. The truck should remain in service for five years and have a residual value of $5,000. The truck's annual mileage is expected to be 28,000 miles in each of the first four years and 18,000 miles in the fifth year-130,000 miles in total. In deciding which depreciation method to use, Carl Thomas, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance). Read the requirements. Requirement 1. Prepare a depreciation schedule for each depreciation method, showing asset cost, depreciation expense, accumulated depreciation, and asset book value. Begin by preparing a depreciation schedule using the straight-line method. Straight-Line Depreciation Schedule Date 1-1-2024 12-31-2024…
Ahmed Corporation is considering replacing a machine that is presently used in its production process. The following information is available: Old New Machine Machine Original cost $45,000 $25,000 Remaining useful life in years 5 5 Current age in years 5 0 Book value $25,000 N/A Current disposal value in cash $5,000 N/A Future disposal value in cash (in five years) $0 $0 Annual cash operating costs $ 8,000 $ 6,000 Required: 1) Which of the data provided in the table are relevant to the decision?
Sweet Manufacturing purchased a machine on August 1, 2023 for use in its factory. Sweet paid $549,600 for the machine and estimated that it had a useful life of 10 years, at the end of which time the machine was expected to have a residual value of $48,000. During its life, the machine was expected to produce 264,000 units. During 2023, the machine produced 26,000 units, and produced 40,000 in 2024. The machine was subject to a 20% CCA rate, and Sweet's year-end was December 31. The machine is eligible for the Accelerated Investment Incentive. Calculate the annual depreciation amount for 2023 and 2024 using the Capital Cost Allowance method. Please ensure that your answer is correct.