Salamon Company purchased equipment on January 1, 2020 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life.
Salamon Company purchased equipment on January 1, 2020 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
- Salamon Company purchased equipment on January 1, 2020 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life.
Instructions
Answer the following independent questions. SHOW ALL CALCULATIONS.
- Compute the amount of
depreciation expense for the year ended December 31, 2020 and 2021, using the straight-line method of depreciation.
- Prepare the
journal entry to record the annual depreciation expense at 12/31/20.
- If 16,000 units of product are produced in 2020 and 24,000 units are produced in 2021, what is the depreciation expense per year for 2020 and 2021 and what is the
accumulated depreciation at December 31, 2021? The company uses the units-of-activity depreciation method.
- If the company uses the double-declining-balance method of depreciation, prepare the following chart for years 1, 2 and 3.
Annual Balance
Year BV-beg of year Rate Deprec. Exp. Accum. Depr. BV-end of year
1
2
3
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