Chapter 11 Exercise 11-3 On October 1, 2013, the Allegheny Corporation purchased
ID: 2359344 • Letter: C
Question
Chapter 11 Exercise 11-3 On October 1, 2013, the Allegheny Corporation purchased machine for 115,000. The estimated service life of the machinery is 10 years and the estimated residual value is 5,000. The machine is expected to produce 220,000 units during its life. Calculate depreciation for 2013 and 2014 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. Round all computations to the nearest dollar. 1) Straight line 2) Sum-of-the-years' digits. 3) Double declining balance. 4) One hundred fifty percent declining balance. 5) Units of production (units produced in 2013, 10,000 units; units produced in 2014, 25,000 units. Thank you for helping.Explanation / Answer
On October 1, 2011, the Allegheny Corporation purchased machinery for $114,000. The estimated service life of the machinery is 11 years and the estimated residual value is $6,000. The machine is expected to produce 224,000 units during its life. Required: Calculate depreciation for 2011 and 2012 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. (Round the depreciation rates to 2 decimal places (e.g. 12.34%) for calculation purposes. Do not round intermediate calculations. Round your final answers to the nearest dollar amount.Omit the "$" sign in your response.) (1) Straight line. Depreciation 2011 $ 2454.5 2012 $ 9818 --------------------------------------… (2) Sum-of-the-years’ digits. Depreciation 2011 $ 4500 2012 $ --------------------------------------… (3) Double-declining balance. Depreciation 2011 $ 5182 2012 $ --------------------------------------… (4) One hundred fifty percent declining balance. Depreciation 2011 $ 3886 2012 $ --------------------------------------… (5) Units of production (units produced in 2011, 11,000; units produced in 2012, 27,000). Depreciation 2011 $ 5280 2012 $ 12960 (2) Sum-of-the-years’ digits. Depreciation 2011 $ 4500 2012 $ --------------------------------------… (3) Double-declining balance. Depreciation 2011 $ 5182 2012 $ --------------------------------------… (4) One hundred fifty percent declining balance. Depreciation 2011 $ 3886 2012 $ Your answers are all correct. This shows that you do know how to calculate each of them. All you have to do now is calculate for the second year. Since you calculated for a partial year (3 months) for the first year, you have to make two calculations for the second year. Step 1. Calculate depreciation for the first nine months of the year. Step 2 Calculate what the new book value is. Step 3 Calculate depreciation for the last three months of the year. Step 4 Add step 1 and 3 to get the depreciation for 2012
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