Flip Company purchased equipment on January 1, 2011 for $90,000. It is estimated

Question

Flip Company purchased equipment on January 1, 2011 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life. Instructions Answer the following independent questions. 1. Compute the amount of depreciation expense for the year ended December 31, 2011, using the straight-line method of depreciation. 2. If 16,000 units of product are produced in 2011 and 24,000 units are produced in 2012, what is the book value of the equipment at December 31, 2012? The company uses the units-of-activity depreciation method. 3. If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation

Explanation / Answer

John Adams Company purchased equipment on January 1, 2011 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life. Instructions: Answer the following independent questions. (Show any calculations in the text boxes provided.) 1. Compute the amount of depreciation expense for the year ended December 31, 2011, using the straight-line method of depreciation. 2. If 16,000 units of product are produced in 2011 and 24,000 units are produced in 2012, what is the book value of the equipment at December 31, 2012? The company uses the units-of-activity depreciation method. 3. If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation, Equipment account at December 31, 2013? 1)90000 less 5000 = 85000 divide by 5 years = 17000 depriciation charge per year should be debted or charged to the income statement as per year ebd dec 31st 2011. 2) first cut off the salvage value 90000 less 5000 = 85000 divide with overall units to be produced in 5 years i.e, 85000 divide 100000 = 0.85$ per unit...so in 2011 16000units multiply 0.85 =$13600 and in 2012 24000units multiply 0.85 =20400.....therefore total depriciation 13600 plus 20400 =34000 and for book value 85000 less 34000 =51000 at 2012 dec

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