Required information [The following information applies to the questions displayed below.] Nicole's Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine was purchased at the beginning of the year at a cost of $16,000. The estimated useful life was five years and the residual value was $1,000. Assume that the estimated productive life of the machine is 10,000 hours. Expected annual production was year 1, 2,400 hours; year 2, 2,300 hours; year 3, 2,200 hours; year 4, 2,100 hours; and year 5, 1,000 hours. 3. Assume NGS sold the hydrotherapy tub system for $4,800 at the end of year 3. The following amounts were forecast for year 3: Sales Revenues $53,000; Cost of Goods Sold $41,000; Other Operating Expenses $5,300; and Interest Expense $1,100. Create an income statement for year 3 for each of the different depreciation methods, ending at Income before Income Tax Expense. (Don't forget to include a loss or gain on disposal for each method.). (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Sales Revenue Cost of Goods Sold Answer is complete but not entirely correct. NICOLE'S GETAWAY SPA (Forecasted) Income Statement For the Year Ended Year 3 Straight- Line Units-of- Production Double- Declining Balance $ 53,000 $ 53,000 $ 53,000 (41,000) ( (41,000) (41,000) 12,000 12,000 12,000 Gross Profit Operating Expenses: Depreciation Expense (3,000) (3,300) (2,304) Other Operating Expenses (5,300) 5,300 5,300 Loss (Gain) on Disposal of PPE 2,200 850 1,344 Total Operating Expenses Income from Operations Interest Expense (6,100) 2,850 4,340 1,500 2,550 8,196 (1,100) (1,100) (1,100) Income before Income Tax Expense 400 1,450 7,096
Required information [The following information applies to the questions displayed below.] Nicole's Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine was purchased at the beginning of the year at a cost of $16,000. The estimated useful life was five years and the residual value was $1,000. Assume that the estimated productive life of the machine is 10,000 hours. Expected annual production was year 1, 2,400 hours; year 2, 2,300 hours; year 3, 2,200 hours; year 4, 2,100 hours; and year 5, 1,000 hours. 3. Assume NGS sold the hydrotherapy tub system for $4,800 at the end of year 3. The following amounts were forecast for year 3: Sales Revenues $53,000; Cost of Goods Sold $41,000; Other Operating Expenses $5,300; and Interest Expense $1,100. Create an income statement for year 3 for each of the different depreciation methods, ending at Income before Income Tax Expense. (Don't forget to include a loss or gain on disposal for each method.). (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Sales Revenue Cost of Goods Sold Answer is complete but not entirely correct. NICOLE'S GETAWAY SPA (Forecasted) Income Statement For the Year Ended Year 3 Straight- Line Units-of- Production Double- Declining Balance $ 53,000 $ 53,000 $ 53,000 (41,000) ( (41,000) (41,000) 12,000 12,000 12,000 Gross Profit Operating Expenses: Depreciation Expense (3,000) (3,300) (2,304) Other Operating Expenses (5,300) 5,300 5,300 Loss (Gain) on Disposal of PPE 2,200 850 1,344 Total Operating Expenses Income from Operations Interest Expense (6,100) 2,850 4,340 1,500 2,550 8,196 (1,100) (1,100) (1,100) Income before Income Tax Expense 400 1,450 7,096
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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![Required information
[The following information applies to the questions displayed below.]
Nicole's Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine
was purchased at the beginning of the year at a cost of $16,000. The estimated useful life was five years and the residual
value was $1,000. Assume that the estimated productive life of the machine is 10,000 hours. Expected annual production
was year 1, 2,400 hours; year 2, 2,300 hours; year 3, 2,200 hours; year 4, 2,100 hours; and year 5, 1,000 hours.
3. Assume NGS sold the hydrotherapy tub system for $4,800 at the end of year 3. The following amounts were forecast for year 3:
Sales Revenues $53,000; Cost of Goods Sold $41,000; Other Operating Expenses $5,300; and Interest Expense $1,100. Create an
income statement for year 3 for each of the different depreciation methods, ending at Income before Income Tax Expense. (Don't
forget to include a loss or gain on disposal for each method.). (Do not round intermediate calculations. Round your answers to the
nearest dollar amount.)
Answer is complete but not entirely correct.
NICOLE'S GETAWAY SPA
(Forecasted) Income Statement
For the Year Ended Year 3
Double-
Straight-
Line
Units-of-
Production
Declining
Balance
Sales Revenue
$
53,000 $
53,000
$
53,000
Cost of Goods Sold
(41,000)
(41,000)
(41,000)
Gross Profit
12,000
12,000
12,000
Operating Expenses:
Depreciation Expense
(3,000)
(3,300) (
(2,304)
Other Operating Expenses
(5,300)
5,300
5,300
Loss (Gain) on Disposal of PPE
2,200
850
1,344
Total Operating Expenses
(6,100)
2,850
4,340
Income from Operations
Interest Expense
Income before Income Tax Expense
1,500
2,550
8,196
(1,100)
(1,100)
(1,100) (
›
400
1,450
7,096](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb22cc348-3bf2-4c9f-9c53-dc82a4d33109%2F30ff88bc-1737-489f-8a38-d06b4d050294%2F2yr2y_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Nicole's Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine
was purchased at the beginning of the year at a cost of $16,000. The estimated useful life was five years and the residual
value was $1,000. Assume that the estimated productive life of the machine is 10,000 hours. Expected annual production
was year 1, 2,400 hours; year 2, 2,300 hours; year 3, 2,200 hours; year 4, 2,100 hours; and year 5, 1,000 hours.
3. Assume NGS sold the hydrotherapy tub system for $4,800 at the end of year 3. The following amounts were forecast for year 3:
Sales Revenues $53,000; Cost of Goods Sold $41,000; Other Operating Expenses $5,300; and Interest Expense $1,100. Create an
income statement for year 3 for each of the different depreciation methods, ending at Income before Income Tax Expense. (Don't
forget to include a loss or gain on disposal for each method.). (Do not round intermediate calculations. Round your answers to the
nearest dollar amount.)
Answer is complete but not entirely correct.
NICOLE'S GETAWAY SPA
(Forecasted) Income Statement
For the Year Ended Year 3
Double-
Straight-
Line
Units-of-
Production
Declining
Balance
Sales Revenue
$
53,000 $
53,000
$
53,000
Cost of Goods Sold
(41,000)
(41,000)
(41,000)
Gross Profit
12,000
12,000
12,000
Operating Expenses:
Depreciation Expense
(3,000)
(3,300) (
(2,304)
Other Operating Expenses
(5,300)
5,300
5,300
Loss (Gain) on Disposal of PPE
2,200
850
1,344
Total Operating Expenses
(6,100)
2,850
4,340
Income from Operations
Interest Expense
Income before Income Tax Expense
1,500
2,550
8,196
(1,100)
(1,100)
(1,100) (
›
400
1,450
7,096
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Step 1: Define Income Statement
VIEWStep 2: Calculation of Depreciation expense using straight line method:
VIEWStep 3: Calculation of Depreciation expense using units-of-production method:
VIEWStep 4: Calculation of Depreciation expense using double-declining method:
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