You are evaluating two different devices. Equipment A costs $215,000 and is used for a period of three years,with a pre-tax operating cost of $32,000 per year. Equipment B costs $355,000 and is used for six years,with a pre-tax operating cost of $42,000 per year. Both units were depreciated to book value of 0 over thelife of the unit using the linear old method of depreciation, assuming a residual value of $20,000. If your taxrate is 35%, the discount rate is 9%. Calculate the average cost of the two machines for the year. Whichmachine do you prefer?Why?

Answered: You are evaluating two different…

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 asset was purchased at a cost of P7,000. It was estimated to have a useful life of ten years with a salvage value of P800 at the end of the time. Determine the total depreciation one year before it was sold using the straight line method.
Chaos company purchased a new truck at the beginning of the year for $60,000. The truck has a useful life of 8 years or 150,000 miles, and an estimated salvage value of $10,000. If the truck is driven 25,000 miles this year, how much depreciation will Chaos report under the double declining balance (DDB) method and the units-of-production (UOP) method? DDB: $12.500; UOP: $10,000 DDB: $15.000; UOP: $10,714 DDB: $15,000; UOP: $10,000
Isabel Company has an equipment costing P700,000 with an estimated residual value of P70,000 and an estimated useful life of 6 years. The company uses straight-line method. After using the asset for two years, The company decided to change the depreciation method to sum of the year's digit method. What is the revised depreciation expense for the 3rd year?
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Susquehanna Company purchased an asset at the beginning of the current year for $250,000. The estimated residual value is $25,000. Susquehanna estimates that the asset will be used for 10 years and uses straiglt-line depreciation. Calculate the depreciation expense per year.
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The Masters Corporation purchased a piece of machinery for $300,000. The expected useful life (EUL) of the machine is 10 years. Machinery of this type normally has a salvage value of approximately 17 percent of the purchase price (use $50,000 for salvage value in this case.) Using the accounting/finance functions in Excel, complete the depreciation worksheet in Exercise11.xls in the following steps: 1. Use the following three methods to compute the depreciation in columns B, C, and D: (1) double- declining balance, (2) straight-line, and (3) sum-of-the-years’ digits. Columns F, G, and H should show the book value of each method for the 10 periods (10 years). Formulas should be used in the empty cells so that a change in the cost, salvage value, or expected useful life of the machinery automatically updates the worksheet. 2. PDF page 1: Print cells A8:H20 into one page with proper format. 3. PDF page 2: Print cell formulas in Cells A15:H15. You may edit the cell…
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A plant asset cost $313600 and is estimated to have a $37000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be O $31170. O $39036. O $27720. O $44100.

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