On January 3, 2020, Lennox Corporation acquired equipment for $120,000. The estimated life of the equipment is 5 years, and the estimated residual value is $2,000. What is the amount of depreciation expense for 2021, if the company uses the double- declining-balance method of depreciation?
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- Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.Cutter Enterprises purchased equipment for $99,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $7,200. Using the double-declining-balance method, depreciation for 2022 would be:
- On January 1, 2021, Gleason Company purchased new machinery for $ 333,000. The new machine was expected to last six (6) years and be sold for parts (after those six years) for$ 60,000. Assume that management sells the equipment for $ 166,500 on December 31, 2023. What amount would be reported as gain or loss on the sale if management applied straight-line depreciation? a. $ -0-. b. $ 196,500 Gain. c. $ 30,000 Gain. d. $ 30,000 Loss. e. None of the above.On March 10, 2027, Skysong Company sells equipment that it purchased for $203,520 on August 20, 2020. It was originally estimated that the equipment would have a life of 12 years and a salvage value of $17,808 at the end of that time, and depreciation has been computed on that basis. The company uses the straight-line method of depreciation. (a) Compute the depreciation charge on this equipment for 2020, for 2027, and the total charge for the period from 2021 to 2026, inclusive, under each of the six following assumptions with respect to partial periods. (Round depreciation per day to 2 decimal places, e.g. 15.64 and final answers to O decimal places, e.g. 45,892.) 1. Depreciation is computed for the exact period of time during which the asset is owned. (Use 365 days for base and record depreciation through March 9, 2027.) 2. Depreciation is computed for the full year on the January 1 balance in the asset account. 3. 4. Depreciation for one-half year is charged on plant assets acquired…Cutter Enterprises purchased equipment for $51,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $6,300.Using the sum-of-the-years'-digits method, depreciation for 2022 and book value at December 31, 2022, would be: (Do not round depreciation rate per year) Multiple Choice $13,600 and $20,400 respectively. $11,920 and $24,180 respectively. $11,920 and $17,880 respectively. $13,600 and $14,100 respectively.
- Cutter Enterprises purchased equipment for $99,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $3,900. Using the double-declining-balance method, depreciation for 2021 and the book value at December 31, 2021, would be:On January 1, 2019, Allen Corp. purchased equipment for $760,000. At the time, it was estimated that the equipment would have a 20 year useful life, and a salvage value of $80,000 at the end of that time. Allen uses straight line depreciation. On January 1, 2024, Allen sold the equipment for $560,375. What amount of gain or loss was reported on the sale? Enter a gain as a positive number or a loss as a negative number.The Nickle Company purchased an asset for P17,000 on January 2, 2021. The asset has an expected residual value P1,000. The depreciation expense for 2021 and 2022 is shown next for three alternative depreciation methods:Year Method A Method B Method C2021 P4,000 P6,400 P6,3752022 4,000 4,800 3,984Required1. Which depreciation method is the company using in each example?2. Compute the depreciation expense for 2023 and 2024 under each method
- Assume that the Cindy Ltd has a depreciateable plant. The plant was acquired on 1 January 2019 at a cost of $360,000. For accounting purposes its useful life is estimated to be 10 years after which time it is expected to have $50,000 residual value. For tax purposes it is to be fully written off over 8 years at 12.5% p.a. of its original cost. Part-year depreciation is calculated on a monthly basis. Determine whether the deprecation of the plant will lead to a deferred tax asset, or a deferred tax liability. What would be the tax difference at 30 June 2022 and is it a deductible temporary difference or a taxable temporary difference?Cutter Enterprises purchased equipment for $78,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $6,600. Using the straight-line method, depreciation for 2022 and the equipment's book value at December 31, 2022, would be:Howarth Manufacturing Company purchased equipment on June 30, 2020, at a cost of $170,000. The residual value of the equipment was estimated to be $20,000 at the end of a five-year life. The equipment was sold on March 31, 2024, for $54,000. Howarth uses the straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service. Required: 1. Prepare the journal entry to record the sale. 2. Assuming that Howarth had instead used the double-declining-balance method, prepare the journal entry to record the sale. + Complete this question by entering your answers in the tabs below. Required 1 No Prepare the journal entry to record the sale. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. General Journal 1 Required 2 No Event 1 1 Required 1 Required 2 Answer is not complete. 10 Event 1 Cash Accumulated depreciation-equipment Loss…
