1.) On January 1, 2013, the Holloran Corporation purchased a machine at a cost o
ID: 2380981 • Letter: 1
Question
1.) On January 1, 2013, the Holloran Corporation purchased a machine at a cost of $55,000. The machine was expected to have a service life of 10 years and a $5,000 residual value. The straight-line depreciation method was used. In 2015 the estimate of residual value was revised from $5,000 to zero. Depreciation for 2015 should be:
2.) In question 1, assume that instead of revising residual value, in 2015 the company switched to the SYD depreciation method. Depreciation for 2015 should be:
3.) Jasper Inc. prepares its financial statements according to International Financial Reporting Standards. At the end of its 2013 fiscal year, the company chooses to revalue its equipment. The equipment cost $810,000, had accumulated depreciation of $360,000 at the end of the year after recording annual depreciation, and had a fair value of $495,000. After the revaluation, the equipment account will have a balance of
Explanation / Answer
1.) On January 1, 2013, the Holloran Corporation purchased a machine at a cost of $55,000. The machine was expected to have a service life of 10 years and a $5,000 residual value. The straight-line depreciation method was used. In 2015 the estimate of residual value was revised from $5,000 to zero. Depreciation for 2015 should be:
Solution
Old depreciation amount = (55000-5000)/10= 5000
Book value in the beginning of 2015 = 55000-5000*2= 45000
Depreciation for 2015 = (45000-0)/8=$5625
2.) In question 1, assume that instead of revising residual value, in 2015 the company switched to the SYD depreciation method. Depreciation for 2015 should be:
Old depreciation amount = (55000-5000)/10= 5000
Book value in the beginning of 2015 = 55000-5000*2= 45000
Amount to be written of = $45,000 - 5,000 = 40,000
SYD = 1 + 2 + 3 + 4 + 5 +6+7+8= 36
3.) Jasper Inc. prepares its financial statements according to International Financial Reporting Standards. At the end of its 2013 fiscal year, the company chooses to revalue its equipment. The equipment cost $810,000, had accumulated depreciation of $360,000 at the end of the year after recording annual depreciation, and had a fair value of $495,000. After the revaluation, the equipment account will have a balance of
Solution
After the revaluation, the equipment account will have a balance of $495,000.
Reason - revaluation records the equipment a fair value
=
$8888.89
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