Oriole Arrow Ltd. purchased a new bus on October 1, 2024, at a total cost of $170,867. Management is considering the merits of usingthe diminishing-balance or units-of-production methods of depreciation instead of the straight-line method, which it currently usesfor its other buses. The new bus has an estimated residual value of $17,000, and an estimated useful life of either four years or301,700 km. Use of the bus will be sporadic so it could be much higher in some years than in others. Assume the new bus is driven asfollows: 7,300 km in 2024; 100,400 km in 2025; 61,600 km in 2026; 96,400 km in 2027; and 36,000 km in 2028. Oriole Arrow has anOctober 31 year end.

The depreciable amount is the cost of the asset minus its residual value. In this case, the cost of…

Answered: Oriole Arrow Ltd. purchased a new bus…

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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An old machine that originally cost $9,500 thus far has accumulated depreciation of$1,900. The remaining useful life is four years, with no salvage value at the end of itsuseful life. A new machine is now available that costs $8,500, with a useful life of fiveyears and no residual value. The old machine could be sold now for $1,400. The annualcash operating costs for the old machine are $5,000, but for the new machine theywould be only $2,500. Gross revenue from the products would be $12,000 annually foreither machine. The company shouldA) keep the old machine to avoid a $6,200 loss on its disposal.B) replace the old machine.C) keep the old machine to avoid an $8,500 decrease in cash.D) keep the old machine to avoid a $1,400 loss on its disposal.
Calligraphy Pens is deciding when to replace its old machine. The machine's current salvage value is $3,050,000. Its current book value is $1,800,000. If not sold, the old machine will require maintenance costs of $710,000 at the end of the year for the next five years. Depreciation on the old machine is $360,000 per year. At the end of five years, it will have a salvage value of $155,000 and a book value of $0. A replacement machine costs $4,650,000 now and requires maintenance costs of $380,000 at the end of each year during its economic life of five years. At the end of the five years, the new machine will have a salvage value of $745,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $3,650,000. The company will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 25 percent and the appropriate discount rate is 7 percent. The company is assumed to earn sufficient revenues to…
Wardell Company purchased a minicomputer on January 1, 2022, at a cost of $48.000 The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $3,000. On January 1, 2024, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $1,200 Exercise 11-23 (Algo) Part 2 2. Prepare the year-end journal entry for depreciation on December 31, 2024. Assume that the company uses the double-decline balance method instead of the straight-line method. Note: If no entry is required for a transaction/event, select "No journal entry required in the first account field. Do not round intermediate calculations. Round your final answers to nearest whole dollar. View transaction list Journal entry worksheet 1 Record depreciation expense for 2024,
Kelly’s Fitness Center purchased a new step machine for $16,500. The apparatus is expected to last four years and have a residual value of $1,500. Costs to deliver this machine are $3,000, costs to repair it in the second year are totaled as $500.What will the depreciation expense and carrying value be for each year under the straight-line method? Assume that the step machine is depreciated using the double declining-balance method. How much would depreciation expense and carrying value be in each year?
Hardev
Bramble Corp. purchased Machine no. 201 on May 1, 2020. The following information relating to Machine no. 201 was gathered at the end of May: Price Credit terms Freight-in costs Preparation and installation costs Labour costs during regular production operations $72,000 2/10, n/30 $700 $3,200 $9,000 It was expected that the machine could be used for 10 years, after which the residual value would be zero. However, Bramble intends to use the machine for only eight years and expects to then be able to sell it for $1,500. The invoice for Machine no. 201 was paid on May 5, 2020. Bramble has a December 31 year end. Depreciation expense should be calculated to the nearest half month. Bramble follows IFRS for financial statement purposes. Calculate the depreciation expense for the years indicated using the following methods. (Do not round intermediate calculations and round final answers to O decimal places, e.g. 5,275.) 1. Straight-line method for the fiscal years ended December 31, 2020 and…
Cari Heat (CH) Ltd. is currently faced with a critical decision regarding its production equipment. Cari Heat (CH) is evaluating two options for its production equipment: upgrading or replacing. The company manufactures and sells 7,500 heaters every year, each priced at $920. The current production equipment, which was acquired at a cost of $2,150,000, has been in use for just two years and is subject to straight-line depreciation over a five-year useful life. Furthermore, it possesses no terminal disposal value, but it can be currently sold for $650,000. The following table presents data for the two alternatives: ABC 1 Choice Upgrade Replace 2 One-time equipment costs $3,500,0003 Variable manufacturing cost per Heater $180 $90 4 Remaining useful life of equipment (years) 3 3 5 Terminal disposal value of equipment 0 0 Required 1. Prepare a schedule, for the remaining 3 years, reflecting whether CH should upgrade its production line or replace it?
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Freida Company is considering an asset replacement project ofreplacing a control device. This old control device has been fullydepreciated but can be sold for $5,000. The new control device, whichis more automated, will cost $42,000. The new device’s installation andshipping costs will total $16,000. The new device will be depreciatedon a straight-line basis over its 2-year economic life to an estimatedsalvage value of $0. The actual salvage value of this device at the endof 2-year period (That is, the market value of the device at the end of2-year period) is estimated to be $4,000. If the replacement project is accepted, Freida will require an initial working capital investment of$2,200 (that is, adding $2,200 initially to its net working capital).During the 1st year of operations, Freida expects its annual revenue toincrease from $72,800 to $90,000. After the 1st year, revenues fromthe replacement are expected to increase at a rate of $2,800 a year forthe remainder of the project…

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