What is the amount of depreciation expenses GM will recognize for the factory at the end of 2028?
What is the amount of depreciation expenses GM will recognize for the factory at the end of 2028?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Denger
![At the end of 2022, GM did not have any PP&E.
On Jan 1, 2023, GM purchased the following assets. Details for setting up depreciation schedules are summarized below:
Assets
Acquisition Cost
Residual
Method
Useful life
Truck
1/1/2023
Warehouse 1/1/2023
Multiple Choice
O
$44,400
Factory
1/1/2023
700,000
500,000
Machinery 1/1/2023
Unit-of production
Machinery's estimated total production capacity is 50,000 units of cars. During 2023, GM produced a total of 10,000 units using the Machinery.
On Dec 31, 2023, sudden changes in the operational and market conditions indicate that the sum of undiscounted future cash flows from the factory is
now estimated at $1,800,000. The fair value of the Factory as of the date is $1,500,000. After recognizing depreciation expense for 2023 as scheduled,
GM wrote-off the factory. The remaining service life is reduced to additional 5 years and the residual value is updated to $150,000. Depreciation for the
factory using these new parameters will start from 2024 with the double-declining method.
During 2024, GM produced a total of 15,000 units using the Machinery.
What is the amount of depreciation expenses GM will recognize for the factory at the end of 2028?
$51,092
$80,966
500,000 100,000
2,000,000 800,000
$77,760
Straight-line
Sum-of-the years'-
digits
Double-declining
3,000,000
2,000,000
10
10
10
10](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F776a3b73-383e-4dc4-b8a0-15ce8f79c933%2Fb7435c09-e9f1-4364-bd44-d0bf5d031aaa%2Fpq9l1e_processed.jpeg&w=3840&q=75)
Transcribed Image Text:At the end of 2022, GM did not have any PP&E.
On Jan 1, 2023, GM purchased the following assets. Details for setting up depreciation schedules are summarized below:
Assets
Acquisition Cost
Residual
Method
Useful life
Truck
1/1/2023
Warehouse 1/1/2023
Multiple Choice
O
$44,400
Factory
1/1/2023
700,000
500,000
Machinery 1/1/2023
Unit-of production
Machinery's estimated total production capacity is 50,000 units of cars. During 2023, GM produced a total of 10,000 units using the Machinery.
On Dec 31, 2023, sudden changes in the operational and market conditions indicate that the sum of undiscounted future cash flows from the factory is
now estimated at $1,800,000. The fair value of the Factory as of the date is $1,500,000. After recognizing depreciation expense for 2023 as scheduled,
GM wrote-off the factory. The remaining service life is reduced to additional 5 years and the residual value is updated to $150,000. Depreciation for the
factory using these new parameters will start from 2024 with the double-declining method.
During 2024, GM produced a total of 15,000 units using the Machinery.
What is the amount of depreciation expenses GM will recognize for the factory at the end of 2028?
$51,092
$80,966
500,000 100,000
2,000,000 800,000
$77,760
Straight-line
Sum-of-the years'-
digits
Double-declining
3,000,000
2,000,000
10
10
10
10
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