Videos
1.
To compute:
The amount of
1.
Explanation of Solution
Given,
Cost of the van is $44,000.
Salvage value is $2,000.
Useful life is 4 years.
Formula to calculate depreciable cost:
Substitute $44,000 as cost of the van and $2,000 as salvage value,
Total depreciable cost is $42,000.
Computation of depreciation amount,
| Year | Straight line ($) |
Units of production ($) |
Double Declining Balance ($) |
|---|---|---|---|
| 2013 | 10,500 | 8,400 | 22,000 |
| 2014 | 10,500 | 12,600 | 11,000 |
| 2015 | 10,500 | 14,000 | 5,500 |
| 2016 | 10,500 | 7,000 | 2,750 |
| Total | 42,000 | 42,000 | 42,000 |
Table (1)
Working Note:
Useful years are 4 years.
Total cost is $42,000.
Formula to calculate depreciation:
Depreciation that will be charged in the 4 years with respect o straight line method is $10,500.
Year 2013
Given,
Total miles driven in year 1 are $12,000.
Total cost is $44,000.
Total miles driven are $60,000.
Formula to calculate depreciation with respect to units of production:
Depreciation per unit is 0.7 per miles.
Computation of depreciation:
Depreciation that will be charged in the first year is $8,400.
Double declining balance method
Given,
Book value of the asset is $44,000.
Useful life is 4 years.
Computation of depreciation rate:
Double declining depreciation rate is 50%.
Computation of depreciation in the first year:
Depreciation that will be charged in the first year is $22,000.
Year 2014
Unit of production method
Miles driven are $18,000 (given).
Depreciation per mile is 0.7 per unit (calculated above).
Computation of depreciation,
Depreciation that will be charged in the second year is $12,600.
Double declining balance method
Computation of book value in year 2:
Book value at the beginning of the 2014 year is $22,000.
Computation of depreciation in the second year:
Depreciation that will be charged in the 2014 year is $11,000.
Year 2015
Unit of production method
Miles driven are $21,000 (given).
Depreciation per mile is 0.7 per unit (calculated above).
Computation of depreciation,
Depreciation that will be charged in the second year is $14,000.
Double declining balance method
Computation of book value in year 2:
Book value at the beginning of the 2015 year is $11,000.
Computation of depreciation in the 2015 year:
Depreciation that will be charged in the 2015 year is $5,500.
Year 2016
Unit of production method
Miles driven are $10,000 (given).
Depreciation per mile is 0.7 per unit (calculated info).
Computation of Depreciation,
Depreciation that will be charged in the second year is $7,000.
Double Declining Balance method
Computation of book value in year 2:
Book value at the beginning of the 2016 year is $5,500.
Computation of depreciation in the 2016 year:
Depreciation that will be charged in the 2016 year is $2,750.
2.
To explain:
The treatment of annual depreciation.
2.
Explanation of Solution
• The annual depreciation will be calculated annually at the end of the financial period.
• The annual depreciation will be treated as an expense for the company and will come in the debit side of the
Hence, the annual depreciation will be treated as an expense.
3.
To explain:
the impact of depreciation method as compared to van’s life.
3.
Explanation of Solution
• In straight line method the depreciation remains constant throughout the course of life. Hence, the same amount of depreciation will be deducted from the net income.
• In the unit of production method, it is calculated as peer the miles driven, it is an effective way of applying depreciation and the burden of depreciation expense shift from year to year as per the vehicle used.
• In double declining method, the depreciation applied is more in the initial years and very less in the end years and the less amount is deducted at the end years, thereby less expenses is deducted from the net income at the end years of the vehicle.
Hence, the impact of depreciation is different in each method.
4.
To compute:
The book value for each year.
4.
Explanation of Solution
Double declining balance method
Year 2014
Double declining balance method
Computation of book value in year 2014:
Year 2015
Book value at the beginning of the year 2015 is $22,000.
Double declining balance method
Computation of book value in year 2015:
Hence, the book value is $11,000
Year 2016
Book value at the starting of the year is $11,000.
Double declining balance method
Computation of book value in year 2016:
The book value will be reported in the asset side of the
Hence, the book value will be shown in the asset side of the balance sheet.
Want to see more full solutions like this?
Chapter 8 Solutions
Connect 2 Semester Access Card for Financial and Managerial Accounting
- Lina purchased a new car for use in her business during 2024. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2024 and 2025 (Lina doesn't want to take bonus depreciation for 2024) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) a. The vehicle cost $40,000, and business use is 100 percent (ignore §179 expense). Year Depreciation deduction 2024 2025arrow_forwardEvergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. a. What is the allowable depreciation on Evergreen's property in the current year, assuming Evergreen does not elect §179 expense and elects out of bonus depreciation?arrow_forwardAssume that TDW Corporation (calendar-year-end) has 2024 taxable income of $952,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024: (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Machinery Computer equipment Furniture Total Placed in Service September 12 February 10 April 2 Basis $ 2,270,250 263,325 880,425 $ 3,414,000 a. What is the maximum amount of §179 expense TDW may deduct for 2024? Maximum §179 expense deductiblearrow_forward
- helparrow_forwardIdentify and discuss at least 7 problems with the Jamaican tax system and then provide recommendations to alleviate the problems.arrow_forwardOn 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. d. Assume the building was purchased and placed in service on 17-Feb of year 1 and is residential property. Depreciation Expense Year 1 Year 2 $ 36,632 Year 3 $ 36,632arrow_forward
- On 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. a. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3? Year 1 Depreciation Expense Year 2 Year 3arrow_forwardOn 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. c. Assume the building was purchased and placed in service on 22-Nov instead of 17-Feb. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3? Year 1 Year 2 Year 3 Depreciation Deductionarrow_forward1) Evaluate the progress and challenges in achieving a single set of global accounting standards. 2) Discuss the benefits and drawbacks of globalization in accounting, providing relevant examples.arrow_forward
- Wanting to finalize a sale before year-end, on December 29, WR Outfitters sold to Bob a warehouse and the land for $140,000. Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount. a. What is Bob's basis in the warehouse and in the land if the appraised value of the warehouse was $100,750 and the appraised value of the land was $115,000? Bob's Basis Warehouse Landarrow_forwardOn 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. e. What would be the depreciation for 2024, 2025, and 2026 if the property were nonresidential property purchased and placed in service 17-Feb, 2007 (assume the same original basis)? Depreciation Year Expense 2024 2025 2026arrow_forwardWhat percentage of RBC’s total assets is held in investments (at October 31, 2020 and 2019)? refer to the 2020 financial statements and accompanying notes of Royal Bank of Canada (RBC). Note that RBC also holds a significant loan portfolio. What is the business reason for holding loans versus securities? Comment on how the investments are classified and presented on the balance sheet. What percentage of total interest income comes from securities (2020 and 2019)? Are there any other lines on the income statement or in OCI) relating to the securities? What percentage of net income (include any relevant OCI items) relates to securities (2020 versus 2019)? Calculate an approximate return on the investments in securities.arrow_forward
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education