Horngren's Financial & Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780133866292
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 9, Problem 9.20E
Computing
Crackling Fried Chicken bought equipment on January 2, 2016, for $21,000. The equipment was expected to remain in service for four years and to perform 3,600 fry jobs. At the end of the equipment's useful life, Crackling's estimates that its residual value will be $3,000. The equipment performed 360 jobs the first year, 1,080 the second year, 1,440 the third, and 720 the fourth year.
Requirements
1. Prepare a schedule of depreciation expense,
2. Which method tracks the wear and tear on the equipment most closely?
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Depreciation Methods
Gruman Company purchased a machine for $198,000 on January 2, 2016. It made the following estimates:
Service life
5 years or 10,000 hours
Production
180,000 units
Residual value
$ 18,000
In 2016, Gruman uses the machine for 2,000 hours and produces 45,000 units. In 2017, Gruman uses the machine for 1,200 hours and produces 32,000 units. If required, round your final answers to the nearest dollar.
Required:
Compute the depreciation for 2016 and 2017 under each of the following methods:
Straight-line method
2016
$ fill in the blank 1
2017
$ fill in the blank 2
Sum-of-the-years'-digits method
2016
$ fill in the blank 3
2017
$ fill in the blank 4
Double-declining-balance method
2016
$ fill in the blank 5
2017
$ fill in the blank 6
Activity method based on hours worked
2016
$ fill in the blank 7
2017
$ fill in the blank 8
Activity method based on units of output
2016
$ fill in the blank 9
2017
$ fill in the blank 10…
Depreciation Methods
Gruman Company purchased a machine for $220,000 on January 2, 2016. It made the following estimates:
Service life
5 years or 10,000 hours
Production
200,000 units
Residual value
$20,000
In 2016, Gruman uses the machine for 1,800 hours and produces 44,000 units. In 2017, Gruman uses the machine for 1,500 hours and produces 35,000 units. If required, round your final answers to the nearest dollar.
Required:
1. Compute the depreciation for 2016 and 2017 under each of the following methods:
a. Straight-line method
2016 $
2017 $
b. Sum-of-the-years'-digits method
2016 $
2017 $
c. Double-declining-balance method
2016 $
2017 $
d. Activity method based on hours worked
2016 $
2017 $
e. Activity method based on units of output
2016 $
2017 $
2. For each method, what is the book value of the machine at the end of 2016? At the end of 2017?
a. Straight-line method
2016 $
2017 $
Depreciation calculation methods Millco, Inc., acquired a machine that cost $1,200,000 early in 2016. The
machine is expected to last for eight years, and its estimated salvage value at the end of its life is $180,000.
Required:
a. Using straight-line depreciation, calculate the depreciation expense to be recognized in the first year of the
machine's life and calculate the accumulated depreciation after the fifth year of the machine's life.
Chapter 9 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
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