**Depreciation Calculation Example**Shearer's Foods, part of the $374 billion global snack food industry, employs 3,300 people in Brewster, Ohio. If Shearer’s purchased a packaging unit for $104,500 with a life expectancy of 685,000 units and a residual value of $36,000, what is the depreciation expense for year 1 if 65,000 units were produced?**Input Field:**- **Depreciation expense**: [Input box for answer] This example aims to calculate the depreciation expense for Shearer’s Foods based on unit production. To solve this, you would use the units-of-production depreciation method, which calculates depreciation based on actual usage.**Components for calculation:**- **Initial Cost**: $104,500- **Residual Value**: $36,000- **Total Expected Production**: 685,000 units- **Units Produced in Year 1**: 65,000 units### Steps to Calculate:1. **Calculate Depreciable Amount**: \[ \text{Depreciable Amount} = \text{Initial Cost} - \text{Residual Value} = 104,500 - 36,000 = 68,500 \]2. **Calculate Depreciation per Unit**: \[ \text{Depreciation per Unit} = \frac{\text{Depreciable Amount}}{\text{Total Expected Production}} = \frac{68,500}{685,000} = 0.10 \text{ per unit} \]3. **Calculate Depreciation Expense for Year 1**: \[ \text{Depreciation Expense} = \text{Depreciation per Unit} \times \text{Units Produced in Year 1} = 0.10 \times 65,000 = 6,500 \]Therefore, the depreciation expense for year 1 is $6,500.

Depreciation expense refers to the reduction in the value of an asset over a period of time due to…

Shearer's Foods, part of the $374 billion global snack food industry, employs 3,300 people in Brewster, Ohio. If Shearer's purchased a packaging unit for $104,500 with a life expectancy of 685,000 units and a residual value of $36,000, what is the depreciation expense for year 1 if 65,000 units were produced? Depreciation expense

Shearer's Foods, part of the $374 billion global snack food industry, employs 3,300 people in Brewster, Ohio. If Shearer's purchased a packaging unit for $104,500 with a life expectancy of 685,000 units and a residual value of $36,000, what is the depreciation expense for year 1 if 65,000 units were produced? Depreciation expense

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Bison Gear and Engineering of St Charles, Illinois, makes sensorless and brushless dc gear motors suited for foodservice equipment, factory automation, alternative energy systems, and other specialty machinery applications. The company purchased an asset 2 years ago that has a 5-year recovery period. The MACRS depreciation charge for year 3 is $14,592. (a) What was the first cost of the asset? (b) Develop the entire MACRS schedule for the asset and determine the depreciation charge in year 1 and next year.
Mercury Inc. purchased equipment in 2016 at a cost of $400,000. The equipment was expected to produce 700,000units over the next five years and have a residual value of $50,000. The equipment was sold for $210,000 part waythrough 2018. Actual production in each year was: 2016 = 100,000 units; 2017 = 160,000 units; 2018 = 80,000units. Mercury uses units-of-production depreciation, and all depreciation has been recorded through the disposaldate.Required:1. Prepare the journal entry to record the sale.2. Assuming that the equipment was sold for $245,000, prepare the journal entry to record the sale.
Please help me with this question: Holmes Packaging sold a machine for $49,500. The company bought this machine for $120,000 seven years ago and was depreciating it on a straight-line basis over ten years to a $12,000 salvage value. What is the gain (loss) that Holmes Packaging should report?
On January 1, 1990, Alamo Steel Company purchased three used delivery trucks at a total cost of P630,000. Before placing the trucks in service, the company spent P22,000 painting them, P8,000 replacing their tires, and P40,000 overhauling their engines and reconditioning their bodies. Alamo management estimates that the trucks will remain in service for six years and have a residual value of P160,000. The trucks’ combined annual mileage is expected to be 18,000 miles in each of the first 4 years and 14,000 miles in each of the next two years. a) Prepare a depreciation schedule using double declining balance and using service output method b) What is the book value of the trucks at the end of 1993 using the straight line method.
9. Newson's Courier Service recently purchased a new delivery van for $29,000. The van is estimated to have a useful life of 8 years or 250,000 kilometres. The van will have a residual value of $1,000. The company uses the units-of- production method of depreciation. Assuming the van travelled 36,000 kms. during the first year, what is the depreciation expense for the van in year 1? A. $3,625 B. $3,500 C. $4,032 D. $4,176
A coal mine expected to contain 6.5 million tons of coal was purchased at a cost of $30 million. One million tons of coal for steel making are produced this year. The gross income for this coal is $15,000,000, and operating costs (excluding depletion expenses) are $1,850,000. If you know that coal has a 10% depletion allowance, what will be the depletion allowance? (a) Cost depletion.The cost depletion for the year is $? (b) What is the percentage of depletion
Your Company has a machine that it uses to make 200,000 units of a component used in its final product. The cost of the machine was $60,000. The machine has a useful life of 5 years and a salvage value of zero at the end of those five years. Annual depreciation on the machine is $12,000. One year of depreciation has been recorded. The per unit variable manufacturing cost of producing the component is $0.05. The only fixed manufacturing cost is the annual depreciation of $12,000 on the stamping machine. Another Company recently offer to supply all of this component for the next four years at $0.07 per unit. If Your Company accepts the offer, the machine would not be needed and could be sold for $35,000. If the order is accepted, what is the total increase or decrease in income over the next four years?
The Dakuten Toy Corporation currently uses an injection molding machine that was purchased 2 years ago. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dakuten is offered a replacement machine which has a cost of $8,000, an estimateduseful life of 6 years, and an estimated salvage value of $800. The company uses straight line method for calculating depreciation in financial accounts. The replacement machine would permit an output expansion, so sales would rise by $1,000 per year; even so, the new machine’s much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would simultaneously…
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $240,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product $ 150,000 Expenses Materials, labor, and overhead (except depreciation) 80,000 Depreciation—Equipment 20,000 Selling, general, and administrative expenses 15,000 Income $ 35,000 (a) Compute the annual net cash flow.(b) Compute the payback period.(c) Compute the accounting rate of return for this equipment.
Stranger Things Corporation is planning to add a new product to its line. To package this product, the company needs to buy a new machine at a cost of $518,000 cost with an expected four-year life and $15,000 salvage value. Additional annual information for this new product line follows: Sales of new product Cost of Goods Sold (does not include depreciation) Selling, general, and administrative expenses (does not include depreciation) Required: (1) Determine income and net cash flow for each year of this machine's life. $ 1,750,000 1,248,000 (2) Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 315,000 (3) Compute net present value for this machine using a discount rate of 5%. Use the Present Value Tables below.
Dorothy & George Company is planning to acquire a new machine at a total cost of $37,500. The machine's estimated life is 6 years and its estimated salvage value is $600. The company estimates that annual cash savings from using this machine will be $8,200. The company's after-tax cost of capital is 7% and its income tax rate is 40%. The company uses straight-line depreciation. (Use Appendix C, Table 1 and Appendix C, Table 2.) (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round answers to the nearest dollar amount.) Required: 1. What is this investment's net after-tax annual cash inflow? 2. Assume that the net after-tax annual cash inflow of this investment is $6,000; what is the net present value (NPV) of this investment? 3. What are the minimum net after-tax annual cost savings that make the proposed investment acceptable (i.e., the dollar cost savings that would yield an NPV of $0)? Hint: Redo the NPV analysis by setting the NPV…
Assume that a firm expects to be able to liquidate the new machine, which cost $400, 000, at the end of its 5- year usable life to net $42, 000 after paying removal and cleanup costs. Had it not been replaced by the new machine, the old machine, which initially cost $240,000 and was used for 3 years before being replaced, would have been liquidated at the end of the 5 years (i. e., the same time the new machine is liquidated) to net $ 10,000. The firm expects to recover its $17,000 net working capital investment upon termination of the project. The firm pays taxes at a rate of 40%. The firm depreciated both machines using a 5-yr MACR schedule as follows: 20%, 32%, 19%, 12%, 12%, 5%. Calculating the terminal cash flow for this machine.